There have been reports in the media that in the wake of fraud involving a sum of USD 1.77 billion that has surfaced in Punjab National Bank (PNB), the Reserve Bank of India (RBI) has directed PNB to meet its commitments under the Letter of Undertaking (LOU) to other banks. RBI denies having given any such instructions.
The fraud in PNB is a case of operational risk arising on account of delinquent behaviour by one or more employees of the bank and failure of internal controls. RBI has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action.
Punjab National Bank is committed to honour all bonafide commitments. In pursuant of Clean and Responsible Banking agenda of the Government, Bank has taken proactive steps to bring the culprits to the books and initiated strong action against the Companies and the staff involved.
1. Bank has already initiated prompt steps for protecting the financial interest of all the lenders/stakeholders including issuance of advisory to lenders involved and to act swiftly to recover the dues.
2. The fraud which was detected by the Bank recently is a standalone incident in one of our branches. It started in March, 2011. We have put our Inspection & Audit Department into action and have not found any other similar incidence.
3. Punjab National Bank has proactively detected and reported this fraud to various Law and Enforcement Agencies and as per the media reports Enforcement Directorate has initiated raids for booking the culprits & to safeguard the financial interest of the lenders.
4. The Bank has kept the other member banks participating in the consortium funding of these two Groups involved to protect the financial interest of banking system at large.
5. Bank has decided to come-on heavily on everyone who was involved in such fraudulent activities so as to pursue clean banking and reforms agenda of the Government.