What is LoU?
✓ Letter of Undertaking is a bank guarantee and is issued for overseas import payments.
✓ A bank, while issuing LoUs for a client (here Nirav Modi), agrees to repay the principal and interest on the client's loan unconditionally.
✓ When an LoU is issued it involves an issuing bank, a receiving bank, an importer and a beneficiary entity overseas.
✓ PNB officials allegedly used their access to SWIFT messaging system (used for the overseas transaction) and verified guarantees given on LoUs without taking necessary sanctions.
✓ As a result, overseas branches of many Indian banks gave forex credit.
✓ Letter of Undertaking is a bank guarantee and is issued for overseas import payments.
✓ A bank, while issuing LoUs for a client (here Nirav Modi), agrees to repay the principal and interest on the client's loan unconditionally.
✓ When an LoU is issued it involves an issuing bank, a receiving bank, an importer and a beneficiary entity overseas.
✓ PNB officials allegedly used their access to SWIFT messaging system (used for the overseas transaction) and verified guarantees given on LoUs without taking necessary sanctions.
✓ As a result, overseas branches of many Indian banks gave forex credit.
What is SWIFT
:no_e
:no_e
✓ When an LoU is issued, the message of credit transfer is conveyed to overseas banks through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system.
✓ This is a significant information as it gives the bank's consent and guarantees.
✓ To issue SWIFT, an official has to log in and fill up confidential information such as the account number and SWIFT code.
✓ It generally has three layers of security - a maker, a checker and a verifier within the core banking system before it is issued.:no_entry: What is CBS?
✓ CBS refers to Core Banking System where all branches are interconnected to ensure that the bank customers - regardless of their home branch - are able to operate their account and transact in any of the member branch located anywhere in the world.
✓ After the advent of this system, a customer is no more customer of a branch, but s/he becomes a customer of the bank.
✓ All the transactions are updated real-time. So, if you are wondering why the PNB couldn't detect the fraud earlier, it is because the PNB official did not rout the transactions through CBS, which would have given real-time data on transacted business.
✓ This is a significant information as it gives the bank's consent and guarantees.
✓ To issue SWIFT, an official has to log in and fill up confidential information such as the account number and SWIFT code.
✓ It generally has three layers of security - a maker, a checker and a verifier within the core banking system before it is issued.:no_entry: What is CBS?
✓ CBS refers to Core Banking System where all branches are interconnected to ensure that the bank customers - regardless of their home branch - are able to operate their account and transact in any of the member branch located anywhere in the world.
✓ After the advent of this system, a customer is no more customer of a branch, but s/he becomes a customer of the bank.
✓ All the transactions are updated real-time. So, if you are wondering why the PNB couldn't detect the fraud earlier, it is because the PNB official did not rout the transactions through CBS, which would have given real-time data on transacted business.