All about PNB scam, LOU
UNDERTAKING THE TERM LOU
LOU (Letter of Undertaking) means that a Financial institution like bank becomes the gauranter for the person, that in case if the person fails to repay the amount than this bank will fulfill the amount on his behalf to those foreign banks who has given the loan.
You can understand the same by taking the example of Nirav Modi himself.
Nirav Modi took a fake Letter Of Undertaking from Punjab National Bank to import his article from foreign country. In this case the foreign country is Hong Kong.
Now he will transfer this Letter of Undertaking to the supplier from whom he is importing.
After that the supplier will in turn go to any bank of his country (in this case the banks are ALLAHABAD BANK, UNION BANK OF INDIA, STATE BANK OF INDIA, AXIS BANK etc) and ask that bank to give him the required amount mentioned in the Letter of Undertaking.
The Bank will now transfer him the money and ask the Letter of Undertaking issuing bank to return the amount.
Now PNB will approach to Nirav Modi and if he fails to credit the prescribed amount than Punjab National Bank is liable to give back the money to that particular bank.
WHERE IS THE SCAM??
Here it is very interesting that the two of the accused bank officials gave the fake Letter of Understanding and the interesting thing is they haven't mentioned any of the details to the book of account of the bank and this thing was going on from 2011.
And add one more thing, these official of the bank haven't issued only one but near about 145 Letter of Understanding and these all amounts to 11 thousand crore.
HOW THIS SCAM UNFURLED?
This January, Nirav Modi's officials came again to the bank and asked the bank to grant them 280 cr as LOU and when official of the bank asked them to give the amount in cash as per rules, they replied that they are taking this letter from past 8 years without such thing so why not now, and then ladies and gentlemen PNB audited themselves and found that there is no scam but there is the MAHA SCAM held under the nose of bank, and then a FIR was filed and now enquiry is going on.
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