Nirav Modi case: What is LoU, CBS, SWIFT? Know these terms to understand PNB fraud
The PNB in its cautionary note to other public and private sector banks said that the suspected fraud was carried out by the perpetrators in collusion with the staff.

- Feb 15, 2018,
- Updated Feb 18, 2018 1:44 PM IST
Punjab National Bank on Monday detected fraudulent transactions worth Rs 11,300 crore at its Brady House branch in Mumbai. The PNB in its cautionary note to other public and private sector banks said that the suspected fraud was carried out by the perpetrators in collusion with the staff. It went on to explain the modus operandi of the scam and said: "It was found through SWIFT trail that one junior level branch official unauthorisedly and fraudulently issued Letters of Undertaking (LoU) on behalf of some companies belonging to Nirav Modi Group for availing buyers' credit from overseas branches of Indian Banks." It further said that none of the transactions were routed through the Core Banking Solution or CBS system, thus avoiding early detection of fraudulent activity. So, what is the CBS that the bank official bypassed to issue fake LoU by using SWIFT:
In January, when a couple of LoUs matured but the banks did not receive their payments, they approached PNB for repayment of the loans. Also, one fraudulent LoU was issued on January 16, 2018, for and on behalf of Modi's firms. The bank officials asked the firms to submit 100% cash margin for the LoU, to which the firms said that they had availed similar facility in the past. An internal inquiry by PNB found that fake LoUs were issued, opening the can of worms.
Punjab National Bank on Monday detected fraudulent transactions worth Rs 11,300 crore at its Brady House branch in Mumbai. The PNB in its cautionary note to other public and private sector banks said that the suspected fraud was carried out by the perpetrators in collusion with the staff. It went on to explain the modus operandi of the scam and said: "It was found through SWIFT trail that one junior level branch official unauthorisedly and fraudulently issued Letters of Undertaking (LoU) on behalf of some companies belonging to Nirav Modi Group for availing buyers' credit from overseas branches of Indian Banks." It further said that none of the transactions were routed through the Core Banking Solution or CBS system, thus avoiding early detection of fraudulent activity. So, what is the CBS that the bank official bypassed to issue fake LoU by using SWIFT:
In January, when a couple of LoUs matured but the banks did not receive their payments, they approached PNB for repayment of the loans. Also, one fraudulent LoU was issued on January 16, 2018, for and on behalf of Modi's firms. The bank officials asked the firms to submit 100% cash margin for the LoU, to which the firms said that they had availed similar facility in the past. An internal inquiry by PNB found that fake LoUs were issued, opening the can of worms.