NEW DELHI: Usually diamonds hog the limelight. But for banks stuck in the alleged fraud at Punjab National Bank (PNB) involving firms owned by way of Nirav Modi and Mehul Choksi, it is the turn of pearls to attract all the consideration.
After all, it comes to the investment of pearls by way of letters of enterprise (LoUs) that have been allegedly issued fraudulently by way of PNB executives to firms owned by way of the 2 diamond buyers. PNB has maintained that banks, which supplied investment at the foundation of those promises, will have to have checked the foundations sooner than extending help.
Typically, lenders do a basic take a look at of KYC guidelines and the purpose for which LoUs are to be issued, including the tenure, which in many cases used to be 360 days as against the RBI’s 90-day norm for gold, silver, valuable and semi-precious metals.
Ideally, that are meant to clinch the problem in PNB’s favour. It is just for capital goods and a couple of other items that the LoU tenure is longer, said assets in other banks. But lenders, who discounted the LoU, said pearls don't seem to be specified as a separate category in the RBI guidelines (do not give a specified time-period for pearls, and lenders are the use of this loophole) and that allowed them to supply investment in response to the promises that have been issued by way of PNB, which later grew to become out have been issued fraudulently.
“The investment is in response to the name of the bank this is issuing the LoU and we had no explanation why to imagine that a fraud used to be happening at PNB. Plus, pearls exist as a separate category in the commerce division’s guidelines,” said a bank executive, who didn't wish to be known.
Bankers said that pearls did exist as a separate category in the RBI’s circulars too, but do not find a separate mention any longer. On its section, PNB executives want to imagine that pearls are a part of valuable and semi-precious stones but that’s one thing that RBI will have to make a decision.
A ruling on this will make a decision how lenders split the load of the fraud, one thing that every one others imagine is PNB’s legal responsibility. Even the government is looking ahead to the end result of the RBI’s decision as it believes that other banks will have to have achieved better due diligence.
After all, it comes to the investment of pearls by way of letters of enterprise (LoUs) that have been allegedly issued fraudulently by way of PNB executives to firms owned by way of the 2 diamond buyers. PNB has maintained that banks, which supplied investment at the foundation of those promises, will have to have checked the foundations sooner than extending help.
Typically, lenders do a basic take a look at of KYC guidelines and the purpose for which LoUs are to be issued, including the tenure, which in many cases used to be 360 days as against the RBI’s 90-day norm for gold, silver, valuable and semi-precious metals.
Ideally, that are meant to clinch the problem in PNB’s favour. It is just for capital goods and a couple of other items that the LoU tenure is longer, said assets in other banks. But lenders, who discounted the LoU, said pearls don't seem to be specified as a separate category in the RBI guidelines (do not give a specified time-period for pearls, and lenders are the use of this loophole) and that allowed them to supply investment in response to the promises that have been issued by way of PNB, which later grew to become out have been issued fraudulently.
“The investment is in response to the name of the bank this is issuing the LoU and we had no explanation why to imagine that a fraud used to be happening at PNB. Plus, pearls exist as a separate category in the commerce division’s guidelines,” said a bank executive, who didn't wish to be known.
Bankers said that pearls did exist as a separate category in the RBI’s circulars too, but do not find a separate mention any longer. On its section, PNB executives want to imagine that pearls are a part of valuable and semi-precious stones but that’s one thing that RBI will have to make a decision.
A ruling on this will make a decision how lenders split the load of the fraud, one thing that every one others imagine is PNB’s legal responsibility. Even the government is looking ahead to the end result of the RBI’s decision as it believes that other banks will have to have achieved better due diligence.
Pearls of wisdom: Missing link in PNB fraud case
![Pearls of wisdom: Missing link in PNB fraud case]()
Reviewed by Kailash
on
February 27, 2018
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