PNB to honour LoUs worth Rs 6,500 cr due to 7 lenders

Putting an end to confusion over the payment obligation towards other lenders, PNB also assured that it will honour all subsequent maturing LoUs and FLCs as and when they are due.

The decision was taken by the board for the payment related to Letters of Undertaking (LoUs) and Foreign Letters of Credit (FLCs) issued by the bank which mature on or before March 31, 2018, PNB said in a statement.

"This will lead to settling of LoUs worth Rs 6,500 crore with 7 banks in relation to the recent fraud that was reported by the bank," it said.

The statement reiterated that when the fraud was detected and reported to the authorities by PNB, the bank had communicated that it has a strong balance sheet to meet any contingent liabilities upon the bank.

This measure will ensure that India's banking system at large has the least possible disruption owing to the unfortunate fraud and banking operations will continue to function smoothly, it said after the board meeting.

In essence, PNB stood by its commitment to honour all bonafide LoUs. This decision of the board sends out a strong message that PNB takes its obligations seriously but does it in a manner that is compliant with the law," the bank chairman Sunil Mehta said.

"PNB board's decision will help restore confidence and stability in the larger banking system. We thank all stakeholders who have supported us during this difficult time, he added.