Reports have emerged of another scam at PNB's Brady House branch in Mumbai, the site of the infamous Rs. 12,650cr Nirav Modi scam.
The latest scam involves a smaller amount, Rs. 9cr, and a relatively unknown brand, Chandri Paper and Allied Products.
A CBI notice says Chandri Paper used a similar MO like Modi, and even connived with the same bank employees.
How did Chandri Paper dupe PNB?
According to CBI, retired PNB employee Gokulnath Shetty and single-window operator Manoj Kharat, both accused in the Modi case, connived with Chandri directors Aditya Rasiwasia and Ishwardas Agarwal.
The company got two Letters of Undertaking (LoUs) for $1.4mn (Rs. 9.09cr) issued favoring SBI Antwerp, Belgium.
This was done despite there Chandri having no available credit limit, nor a 110% margin retained by the bank.
What is an LoU?
An LoU is a kind of bank guarantee. With this, a customer can raise money as credit from another bank. The LoU serves as guarantee that if the debtor fails to repay the credit, the issuer bank will step in and pay up.
Shetty and Kharat, already under investigation, named in fresh case
On March 9, the CBI filed an FIR in the case, naming Rasiwasia, Agarwal, Shetty and Kharat as accused along with the company.
Shetty, who retired on May 31, 2017, and Kharat are already under investigation in the Modi scam. They allegedly helped the billionaire obtain LoUs fraudulently too.
The Modi case had come to light after conniving PNB employees retired and were replaced.
Fallout: RBI discontinues LoUs/LoCs issuance for trade credits
Meanwhile, after the Modi scam, the RBI has decided to discontinue issuance of LoUs and LoCs (letters of comfort) as trade credits for imports into the country.
It asked AD (Authorized Dealer) Category-I banks to stop the practice with immediate effect. Existing LoUs/LoCs, however, would be reportedly honored.
This could adversely affect importers who depend on these letters for obtaining bank guarantees for imports.