Money & Banking

Axis Bank says it sold PNB exposure in Hong Kong

Our Bureau Mumbai | Updated on February 15, 2018

Axis Bank on Thursday said it ‘sold down all the buyers’ credit transactions’ undertaken by its Hong Kong branch with Punjab National Bank.

Buyers’ credit is a loan extended by a bank to an importer to finance imports. Banks usually sell down loans/bonds to reduce their exposure.

India’s third-largest private sector bank notified the stock exchanges in this regard in the wake of state-run PNB disclosing that fraudulent and unauthorised transactions aggregating about $1.8 billion were detected in one of its branches in Mumbai.

PNB’s complaint for registration of first information report (FIR) against the accused persons for having committed offences of cheating and fraud, thereby causing a loss to the banks, mentions that two branch officials from the mid-corporate branch at Brady House, Mumbai, issued letters of undertaking (LoU) in favour of Allahabad Bank and Axis Bank in Hong Kong. Axis Bank said it is an active participant in the secondary market for buyers’ credit transactions and it has sold ‘all the referred transactions’.

The bank elaborated that in the normal course of business, it undertakes, through its overseas branches, transactions against LoUs issued by other banks. These amounts are then credited to the LoU-issuing bank’s Nostro accounts.

The private sector bank said it has undertaken such transactions in the past with PNB against their authenticated SWIFT LoUs. PNB appears to be trying to wriggle out of the mess by stating, in a ‘caution notice to all bank chiefs’, that ‘none of the overseas branches of India-based banks have shared with us any document/information made available to them by these Indian companies at the time of availing buyers’ credit from them’.

Published on February 15, 2018

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