The Punjab National Bank (PNB), which is reeling from a ₹11,500-crore fraud , has reached out to other lenders to alert them about the perpetrators’ modus operandi. It, however, apportioned a share of the blame to its competitors’ overseas branches.
In a letter, dated February 12, to CEOs of other banks, the PNB said it was found that the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system was misused by a junior-level branch official. He had fraudulently issued letters of undertaking (LoUs) on behalf of some companies for availing buyers’ credit from overseas branches of Indian banks.
The SWIFT network and identification codes are most commonly used for international wire transfers.
'Transactions not routed through CBS'
“The companies were maintaining only current account with the branch and were not enjoying any fund or non-fund based limits. None of the transactions were routed through the CBS [core banking solution] system, thus avoiding early detection of the fraudulent activity,” PNB wrote.
In one instance, LoUs were opened in favour of overseas branches of Indian banks for import of pearls for a period of one year, for which as per RBI norms, the total time period allowed is 90 days from the date of shipment.
“This stipulation was overlooked by overseas branches of Indian banks, who are required to follow RBI guidelines,” PNB said, adding none of them had shared any information at the time of availing buyers’ credit.
“This information is being shared strictly for exercising necessary caution in the matter,” the bank added.