The entrance of Punjab National Bank's Brady House branch in Mumbai. Photo: AFP
The entrance of Punjab National Bank's Brady House branch in Mumbai. Photo: AFP

India’s second largest publicly owned bank Punjab National Bank (PNB) has revealed it has no plans to close operations at its scandal-hit Brady House branch in Mumbai, which in January was at the center of the infamous Nirav Modi scam. The bank has issued a statement saying it will tighten measures to prevent such events occurring, Press Trust of India reports. 

Diamond trader Modi and his uncle Mehul Choksi, working together with bank officials at the Brady House branch, allegedly cheated PNB out of 140 billion rupees (US$ 2.04 billion) through the issuance of fraudulent letters of undertaking (LoUs).

The rogue officials had taken advantage of the branch’s SWIFT system, which at the time was not integrated into the bank’s official core network. This allowed the scam to go undetected for nearly seven years, resulting in what is considered to be the biggest such fraud in Indian banking history.

While PNB revealed that the Brady House branch is to remain open, it will strengthen internal systems and processes and centralize certain critical functions. Retail operations continue to be conducted from the branch.

To deal with losses incurred on account of the scam, the bank has set aside 71.78 billion rupees (US$ 1.05 billion) or nearly 50% of the total amount, in the fourth quarter of 2017-18. The remainder will be covered in the three quarters of the current fiscal year.

PNB paid 65.86 billion rupees (US$ 960 million) to other banks to discharge its liabilities from LoUs and Foreign Letters of Credit issued fraudulently.