India's central bank may give Punjab National Bank up to one year to make provisions against the US$2 billion fraud case it is embroiled in, Press Trust of India reported March 8, citing sources.
The lender had written a letter to the central bank seeking its opinion on making provisions for the losses.
As there is no precedent guidance over fraudulent letters of undertaking, a key component of the case, the central bank is likely to allow PNB a period of up to four quarters, the report noted.
The move comes as India's Central Bureau of Investigation filed a new case against jeweler Nirav Modi for allegedly colluding with several others to defraud the bank through different loans between 2013 and 2017.
In February, Punjab National Bank reported that it detected US$1.77 billion worth of "fraudulent and unauthorized" transactions at one of its branches in Mumbai, India. The bank disclosed the scam surfaced after a Modi-linked company presented documents in a Mumbai branch in January to seek buyers' credit for making payment to overseas suppliers.
It was subsequently found that the branch's officials had issued letters of undertaking to the company for buyers' credit without obtaining necessary approvals.
PNB later said it expects to uncover an additional US$204.3 million of fraudulent loans. Earlier in March, CBI arrested the bank's former internal chief auditor in connection with the case.
