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A review of letters of undertaking (LoUs) issued by public sector banks has shown that there are no more unauthorised or fraudulent LoUs in the system, a senior official of State Bank of India said on Thursday.
The review, which was part of a three-day workshop organised by public sector banks on risk management, comes soon after Punjab National Bank reported fraudulent transactions worth Rs 12,700 crore using LoUs.
Terming it a one-off incident among 5,000 branches dealing in foreign exchange in the entire banking system in India, M S Sastry, Deputy Managing Director, SBI, said: “Each bank has already scanned its LoUs and Letter of Credit-related transactions and has confirmed during the workshop that all of them are properly assessed, genuine and accounted for except those already reported.”
Addressing reporters after the workshop, Sastry said that the decision by the Reserve Bank of India to bar LoUs from being issued could raise the cost of capital. However, businesses could still use other forms for financing and it would not impact credit for any sector.
He further said that more controls have been put in place, including an additional layer of approval for all outward SWIFT messages, integration of SWIFT with Core Banking Solution latest by April 30 and time restrictions for such transactions.
Banks will implement all these changes within the next three to six months after taking approval from their respective boards.
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