PNB warns peers about LoU fraud |ForumIAS

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Context:

Reeling from a ₹11,500-crore fraud, Punjab National Bank reached out to alert other lenders to the perpetrators’ modus operandi, while at the same time apportioning a share of the blame to its competitors’ overseas branches.

What has happened?

Recently, PNB found that the SWIFT system had been misused by a junior-level branch officials, who had fraudulently issued letters of undertaking (LoUs) on behalf of some companies for availing buyer’s credit from overseas branches of Indian banks.
The SWIFT network and identification codes are most commonly used for international wire transfers.
In one instance, LoUs were opened in favour of overseas branches of Indian banks for import of pearls for a period of one year, for which as per RBI norms, the total time period allowed is 90 days from the date of shipment.