Mumbai, Feb 16: India’s state-run Union Bank of India on Thursday said that it has an outstanding exposure of about $300 million in the $1.8 billion fraud detected by Punjab National Bank (PNB) and the former was also confident of receiving the payment.
PNB, the second largest public sector bank in India, had detected the $1.8 billion fraud in one of its branches in Mumbai and Union Bank of India was among other banks that were said to have offered credit-based on letters of undertakings (LoUs) issued by PNB.
“The outstanding exposure related to the incident is approximately $300 million and the bank is fully secured by LoU/LC/other documents and fully confident to receive the payment,” it said in a regulatory filing late on Thursday.
An LoU is in effect a guarantee issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.
The lender said that through its foreign branches, it has been taking exposure with PNB as counter party under various LoU issued through authenticated SWIFT.
The bank has also purchased some Buyers’ Credit Assets from Axis Bank through Risk Participation as a part of normal international business practice.