A day after the Punjab National Bank reported one of the biggest bank-related frauds, the Reserve Bank of India on Thursday directed the former to pay entire amount of Rs 11,300 crore to counterparty lenders.
Quoting RBI sources, an Economic Times report said that it is essential for the PNB to repay the loan to maintain the trust factor associated with the banking industry.
The PNB, that is already short of funds and facing a bloodbath in the share market, has sought government intervention, the report added.
"If PNB does not pay up, it will lead to double provisioning-- both PNB and 30 other banks will have provide for the huge loss," one of the officials was quoted as saying by the paper.
PNB on Wednesday had disclosed that two of its staff had issued fraudulent 'Letters of Undertaking' (LoU) that allowed at least three companies related to Nirav Modi to to raise short-term buyer’s credit from international branches of a host of Indian banks.
In a case like this, reported Bloomberg Quint, the client(Nirav Modi) or his companies, would repay PNB which in turn would pay the banks that loaned out the funds.
Modi had offered to repay at least Rs 6,000 crore by selling assets.
In a ‘cautionary notice’ sent to banks on Monday, PNB brought up the possibility that employees at overseas branches of other Indian banks had been involved in the foul play.
