India's Punjab National Bank (PNB) is likely to shut down its Kowloon branch in Hong Kong in the next few days according to local media there.

The Indian state-owned bank, which was allegedly defrauded by celebrity jeweller Nirav Modi and Mehul Choksi of some US$2 billion when they misused letters of credit (L/Cs) and letters of understanding (LoUs) is reviewing the performance of its overseas banking operations amidst reports of growing non-performing loans (NPLs) at its branches worldwide.

Trade finance review

The bank is reportedly reviewing trade finance accounts it operates in London, Hong Kong and Dubai.

PNB has a presence in Hong Kong through two branches. Central Hong Kong is the main branch while there is another one in Kowloon in northern Hong Kong.

Local sources are quoted as saying the Kowloon branch is likely to close within days.

Branch closure

The branch provides mainly trade finance although it also offers several other banking facilities.

According to sources close to PNB, the Kowloon branch is likely to close due to its holding several NPLs taken out by big borrowers.

L/C and LoU frauds

The bank in its annual report had observed that a fraud was detected at its Brady House, Mumbai branch in India.

Some L/Cs and LoUs were issued fraudulently and in an unauthorised manner to certain overseas branches of Indian banks through the misuse of the SWIFT messaging platform.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.