PNB, the second-biggest Indian state-run lender, uncovered in January the alleged fraud in which certain bank officials were suspected of colluding with Modi and Choksi to issue fraudulent letters of undertaking (LoUs) for their firms to raise loans from overseas branches of mostly Indian banks.
Both Modi and Choksi have denied wrongdoing, and so have two key accused PNB employees in the case that has been dubbed as India’s largest-ever bank fraud.
ET, citing sources, said PNB has agreed to honor claims due by end-March but has mandated that peer banks will have to pay PNB if investigative authorities prove that there was malafide intent on the part of these banks.
PNB did not immediately respond to requests for comment.
About 60 billion rupees ($924.14 million) is due to these banks by end of March, ET said.
State Bank of India and three other state-run banks, Union Bank of India, UCO Bank and Allahabad Bank, are among lenders who have extended credit based on the LoUs issued by PNB that were later found to be fraudulent.
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