The Reserve Bank of India (RBI) has pointed out failure of internal control as of the main reason behind the ₹11,500 crore fraud that rocked state-run lender Punjab National Bank.
In a statement issued on late evening Friday, the banking regulator for the first time spoke about the issue that came to attention on Wednesday and said the fraud at the country’s second largest lender is a case of operational risk arising out of delinquent behaviour by the bank’s employees.
“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,” the Central Bank said. RBI said it is assessing the situation and will take appropriate supervisory action.
“RBI has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action,” it said.
The regulator denied media reports that it has asked PNB to pay other banks.
“There have been reports in the media that in the wake of fraud involving a sum of $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 statement added.
On Wednesday, the second largest lender of the country informed the stock exchanges about detection of $ 1.77 billion (₹11,500 crore) unauthorised transactions where fraudulent letters of undertaking (LoUs) were issued from a branch in Mumbai to secure overseas credit. The PNB stocks tanked 22.3% since the scam broke.
Published - February 16, 2018 09:12 pm IST