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After PNB, Rs 3.9-bn Oriental Bank of Commerce scam hits banking sector

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NEWDEHLI:-Another alleged fraudulent loan scam, involving Rs 3.90 billion, has emerged in the jewellery sector.The Central Bureau of Investigation (CBI) has registered a case against a Delhi-based jeweller on a complaint from government-owned (OBC).The lender has alleged the firm, International, cheated the bank with the help of some of its officials, using Letters of Credit (LCs) — a banking instrument similar to those used by a group of companies belonging to and to allegedly defraud of Rs 114 billion.An LC is an obligation accepted by a bank to make a payment if specified criteria are met.International was taking loans from since 2007, using LCs. “The borrowers were utilising this facility for discounting of bills, under letters of credit established by Dubai Bank Kenya, Soleil Chartered Bank, Trade Chartered Bank, TF Bank Kontrakt Inc, Century Bank Corp LCC, etc,” said in its complaint to the CBI, which registered a First Information Report on Thursday against the firm and unknown bank officials.The practice of raising loans through LCs continued till noticed the other were poorly rated. The lender then stopped the credit facility.

The firm did not repay loans on time and demanded extension of the repayment window due to poor business conditions.“Now, for the last 10 months, the customer is not responding and he and his family is not available at the address in the bank records,” the Gurugram-headquartered bank has told the CBI.During a forensic audit, the bank found some of the foreign that had issued letters of credit “had negative ratings, with no connection or presence in the country of the counterparties.”“One of the LC-issuing was a non-existent bank on the basis of the correspondence address given in the borrower’s invoice,” found the forensic audit by Grant Thornton India, commissioned by  The LC facility was used to pay off other trade creditors against purchase of gold and other precious stones, which were transferred to other countries “using fictitious trade transactions”. The money gained was used to pay off the letters of credit liabilities, the forensic auditor noted.

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