RBI orders new protocols after $1.77 billion fraud at PNB

Vastavam web: India’s central bank has told lenders to link their internal software with the SWIFT interbank messaging system by the end of April, and to alter a range of other protocols with immediate effect, as fallout from an alleged $1.77 billion fraud at Punjab National Bank (PNB) continues to swell.In what has been dubbed the biggest loan fraud in India’s history, the No. 2 state-run lender PNB (PNBK.NS) has alleged that two employees at a Mumbai branch colluded with firms linked to well-known jewellers Nirav Modi and his uncle, Mehul Choksi.

A lawyer for Modi has denied his client was involved in any fraud. Choksi has not commented but his firm, Gitanjali Gems (GTGM.NS), has also denied involvement in the alleged fraud.PNB says the fraud dates back to 2011 and stayed undetected as the employees did not enter the transactions in PNB’s core software after sending instructions to overseas banks through SWIFT.

Many Indian banks, including PNB, have not linked their core banking systems with the SWIFT network, which is widely used by global banks to communicate with each other on transactions.