India's Punjab National Bank is downsizing its operations in the Brady House branch in Mumbai as it seeks to tighten controls and restore its reputation following a US$2 billion fraud, Reuters reported July 3, citing four sources with knowledge of the decision.
The Brady House branch was at the forefront of the fraud, where the bank's staff issued credit guarantees to diamond magnate Nirav Modi over the SWIFT interbank messaging network, according to an internal investigation released in late June. The fraud came to surface after the bank disclosed it detected fraudulent and unauthorized transactions at the Brady House branch.
As part of the plan, the bank will move all big client accounts involving annual transactions of more than 500 million Indian rupees to large corporate branches for "better monitoring," one of the sources told Reuters. Only a small retail banking operation will remain open at the branch after the restructuring, one of the sources said.
Business at the branch's foreign exchange operations has dropped significantly since the fraud came to light, said one of the sources. Three of the sources said that more than two dozen employees have been informed about the downsizing, adding that the branch could eventually be shut down.
A Punjab National Bank spokesperson said the bank has no plan to close operations at the Brady House branch, adding that the reallocation of some of the accounts was part of a regular restructuring to strengthen internal systems and processes and centralize certain critical functions. Retail operations for the bank customers continue to operate from the branch, the spokesperson added.
The bank will consider similar steps at some other branches as well to minimize risks, said one of the sources.
As of July 3, US$1 was equivalent to 68.56 Indian rupees.