Congress continues attack over PNB fraud while RBI initiates special audit

Rattled by a spate of banking frauds, RBI has initiated a special audit of state-owned lenders with focus on trade financing activities, especially relating to the issuance of LoUs by them.

Congress continues attack over PNB fraud while RBI initiates special audit
File photo

New Delhi: Congress president Rahul Gandhi on Monday reiterated the issue of alleged fraud in the Punjab National Bank. Rahul has been constantly targetting the Prime Minister and the government over the alleged scam.

The matter has been referred to law enforcement agencies. Jeweller Nirav Modi is one of the main accused. His uncle Mehul Choksi, owner of Geetanjali Gems, is also an accused. Both have since fled the country.

On March 6, 2018, Rahul and Congress MPs had protested against the PNB 'scam'. Accusing BJP of shielding Nirav, Rahul had said that the guilty must be punished for their deeds.

On the other hand, BJP has hit back saying financial wrongdoings happened during the Congress rule before 2014. Law Minister Ravi Shankar Prasad had said earlier that the Congress had laid out landmines during UPA 1 and 2, and that these were exploding on them now.

Meanwhile, RBI has initiated a special audit of state-owned lenders with focus on trade financing activities, especially relating to the issuance of letters of undertakings (LoUs) by them, PTI quoted banking sources as saying on Sunday.

In addition, the RBI has asked all banks for details of the LoUs they had written, including the amounts outstanding, and whether the banks had pre-approved credit limits or kept enough cash on margin before issuing the guarantees.

Most of the big banking frauds which were unearthed in the recent past, including the one perpetuated by diamantaire Nirav Modi and his associates, pertain to trade finance. 

Banks have also been asked by the finance ministry to come up with a "pre-emptive" action plan to combat rising operational and technical risks, and assign clear accountability to senior functionaries.

In view of the recent Rs 12,646-crore PNB scam, done through fraudulent issuance of LoUs by the connivance of the bank's staff, it was pertinent for the regulator RBI to examine the issue of trade finance which also included issuance of letter of credit (LC) and LoUs, sources said, as per PTI.

Banks have also been asked by the finance ministry to come up with a "pre-emptive" action plan to combat rising operational and technical risks and assign clear accountability to senior functionaries. 

(With PTI inputs)