Union Bank of India has stated that it has an exposure of $300 million out of the Rs. 11,400 Crore fraud put together by PNB but also said that it will recover its money and it is safe. Union Bank of India also said that the late-night filing to stock exchanges has been taking the exposure with PNB as counterparty under letters of undertakings issued via the SWIFT message. The bank has also bought Buyers Credit assets from the Axis Bank via risk participation as part of the normal international business practice. The outstanding exposure related to the incident is about $300 million and the bank is secured fully by LC/LoU and other documents and is confident that they will get their money back.
The shares of the Union Bank of India dropped to Rs. 117.25 by 2.37 percent along with the PNB stock which fell to Rs. 124.45 by 3 percent on the Bombay Stock Exchange. PNB had also filed an FIR with CBI last week saying that all the fraudulent LoUs which were worth Rs. 280.7 Crore were issued on January 16 first. PNB also said that at that time, it was digging into the records to find out about the magnitude of the fraud. PNB had named three diamond firms namely Diamond R Us, Stellar Diamonds and Solar Exports in the complaint saying that these firms had approached it on 16th January requesting for buyers credit in order to make a payment to the suppliers overseas.
The bank required cash margins of 100 percent in order to issue the LoUs in order to raise the buyer’s credit which was contested by the firms stating that they had made use of the facility from as early as 2010. Partners in Diamonds R US, Solar Exports and Stellar Diamonds are Nirav Modi, his wife Ami and brothers Nishal and Mehul Choksi. These firms shop in foreign locations including Dubai, New York, and Hong Kong.