PSU Banks trade weak; PNB, Canara Bank down over 3%

Shares of public sector undertaking (PSU) banks were trading lower by up to 4% on the National Stock Exchange (NSE) on Wednesday after a media report suggested that Punjab National Bank (PNB) told police that it has uncovered additional exposure of about Rs 9.42 billion in connection with a massive alleged fraud.

“The amounts of Rs 9.42 billion were the regular limits sanctioned to Geetanjali Group under consortium lending, and were standard credit exposure at the time of detection of the fraud. Now, this exposure is being added to the existing fraudulent amount. This amount has nothing to do with any new fraudulent letters of undertaking (LoUs) and letters of comfort (LoCs),” PNB said on a clarification on news report.

Meanwhile, the Reserve Bank of India (RBI) on Tuesday discontinued issuance of LoUs and LoCs for importers with immediate effect, in an attempt to prevent fraud such as the one allegedly carried out by jewellers Nirav Modi and Mehul Choksi.
Letters of credit (LCs) and guarantees will continue to be issued like before if they meet certain criteria.

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