India's state-owned Punjab National Bank (PNB) has issued a statement saying it will honour all foreign letters of credit (L/Cs) as well as inter-bank letters of undertaking (LoUs) issued by it that mature on or before 31 March 2018.

The statement responds to the multi-million dollar fraud unearthed earlier this year at the bank and a spate of L/C and LoU frauds involving several of India's state-owned banks and traders in the jewellery and precious gems and metals sectors.

Bank statement

The decision to issue the statement was taken by the board of PNB in a meeting held earlier this month.

The board's decision will lead to the settlement of LoUs worth the equivalent of US$977 million with seven banks caught up in the US$1.9 billion fraud that allegedly involved PNB officials and celebrity jeweller, Nirav Modi.

"The bank will also honour all subsequent maturing LoUs and foreign L/Cs as and when they are due," according to the bank statement.


According to PNB, it has a balance sheet sufficiently strong to meet any contingent liabilities arising out of the recent fraud.

"This measure will ensure that India's banking system at large has the least possible disruption owing to the unfortunate fraud and banking operations will continue to function smoothly," the statement said.

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