PNB must bear liability; Sold off all LoUs says Axis Bank

Last Updated: Thu, Feb 15, 2018 12:29 hrs
Punjab National Bank

Axis Bank, the country's fourth largest private lender, has said that it has sold-off Punjab National Bank's letter of understandings, in secondary market transactions.

The bank, in its regulatory report with the Bombay Stock Exchange, said, "Axis Bank is also an active participant in the secondary market for such transactions, and the Bank had sold down all of the referred transactions."

The bank referred to the letters of undertakings from Punjab National Bank that it had exposure to. "Axis Bank has in the past undertaken such transactions with PNB against their authenticated SWIFT LOUs," said a note, signed by Jairam Sridharan, Axis's CFO.

According to unverified market claims, Axis Bank had an of 17.5% to to the Rs 11,400 crore scam ($1.77 billion). Axis Bank had credited amount worth Rs 2000 crore against the PNB's LoU, that the latter issued to Nirav Modi and Gitanjali Gems.

Besides Axis Bank, five other banks have discounted bills against PNB-issued LoUs. Banking experts said this could spin into additional debts for the banking sector as a whole.

Here are the banks that gave a credit against PNB's LoUs:

  • Union Bank- Rs 2300 crore
  • Allahabad Bank- over Rs 2000 crore
  • State Bank of India- 960 crore

These banks have argued that money was sent to PNB's nostro account, and hence PNB must bear liabilities.

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