But the Central Bureau of Investigation (CBI) has now observed that the Brady House branch apparently did not take any commission for about 150 such LoUs totalling Rs 6,498 crore, causing a potential loss in crores of rupees to the public-sector lender.
A former banker at a state-run lender said a bank could normally earn around 1-1.5% commission for opening an LoU with a one-year maturity. It could earn around half of that for opening an LoU with a six-month maturity. The LoUs, which CBI says were issued between January and April last year to Nirav Modi firms, allowed the beneficiaries to access cheap buyer’s credit abroad for importing pearls and rough diamonds.
“The branch (Brady House) has not even taken commission for the opening of LoUs in respect of around 150 LoUs and, thereby, caused a loss of crores of rupees to the bank,” the agency observed while seeking judicial custody of MK Sharma, the internal chief auditor of PNB arrested on February 28.
The 150 LoUs fall due from January 25 to April 20 this year. Sharma, the CBI alleges, in conspiracy with other co-accused, deliberately “ignored to point out the issuance of illegal LoUs and allowed Gokulnath Shetty to open LoUs to favour the beneficiary private parties — Stellar Diamond, Solar Exports and Diamonds R US, which resulted in huge loss/liability to Punjab National Bank to the tune of Rs 6,498 crore.”
During police custody, Sharma denied having any knowledge of issuance of any LoU in favour of the aforesaid firms. CBI said he allowed one of the main accused, Gokulnath Shetty, former deputy manager at PNB, to perpetrate the scam by not tallying the daily entries on Swift, used by the latter to transmit the fraudulent LoU details to overseas branches of Indian banks, with the bank’s core banking solution entries.
In the case of Gitanjali Gems and other related companies, CBI says Shetty fraudulently issued 143 LoUs and enhanced the value of 313 foreign letters of credit in favour of various overseas branches of Indian banks without following the prescribed procedure.