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India's second largest bank PNB has said it will honour all its bonafide commitments after the scam surfaced involving allegedly fraudulent use of Letter of Undertakings (LOUs) by jeweller Nirav Modi and his associates.
The government is of the view that the issue is between PNB and other public sector banks and it should be resolved amicably as soon as possible, sources said.
PNB fraud: How Nirav Modi's companies embezzled crores
Keeping this in mind, the Department of Financial Services would soon call a meeting of top officials of all the banks involved in the matter, sources added.
The PNB fraud pertains to issuance of fake Letters of Understanding (LoUs) to companies associated with billionaire jeweller Nirav Modi by errant PNB employees, which enabled these companies to get buyers credit from international branches of other Indian lenders.
Banks said to be directly or indirectly affected by the scam include SBI, Allahabad Bank and Union Bank of India.
Last month, PNB had lodged an FIR with CBI stating that fraudulent LoUs worth Rs 280.7 crore were first issued on January 16. At that time, PNB had said it was digging into records to examine the magnitude of the fraud.
In the complaint, PNB had named three diamond firms -- Diamonds R Us, Solar Exports and Stellar Diamonds - saying they had approached it on January 16 with a request for buyers credit for making payment to overseas suppliers.
The case is already being probed by multiple agencies and the CBI has arrested a general manager-rank officer of the Punjab National Bank in connection with the alleged fraud.
Rajesh Jindal, who was the head of the Brady House, Mumbai, branch of the bank during 2009-11, was also taken into custody on Tuesday night.
It is alleged that the issuance of Letters of Undertaking (LOU) to Nirav Modi group firms without sanctioned limits started during his tenure.
Modi runs an international jewellery empire that reaches from India to New York, with a string of high-end brands. He and his family fled India weeks before the bank registered a criminal case with the CBI on January 31.
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While maintaining a stable outlook on the solar power sector, domestic rating agency India Rating has revised upwards the outlook on the wind power sector to stable from negative for FY19 but has maintained its negative outlook on the thermal power sector. Citing lack of visibility for tying up long-term power purchase agreements, the agency has maintained its negative outlook on the thermal power sector for FY19.
The agency expects favourable environment for the wind and solar energy sectors as bids are being driven by Central agencies and power purchase agreements (PPAs) are becoming favourable to developers in terms of addressing grid curtailment and termination issues. “Development of guarantee funds by states/bidders, incentives to local solar panel manufacturers and exploring of wind-solar hybrid projects and offshore wind projects indicate a sustaining growth momentum in renewable power,” it said in a report today.
India Ratings feels uncertainties in solar panel costs, unpredictable behaviour of distribution companies (discoms) and operational troubles from wind turbine manufacturers need to be addressed by renewable developers. “We believe that avoidance of downtime of solar and wind plants are critical in ensuring the predicted internal rate of returns,” the report said.
According to the agency, adequate liquidity back-ups and counterparty risks as the most critical factors for renewable projects. It, however, maintained a negative outlook on the thermal power sector for FY19, due to lack of visibility for tying up long-term PPAs.
“Existing excess power tie-up of discoms and PPAs already signed with central and state sector generating companies for buying power from 40GW under construction thermal plants, preclude the need for purchasing power from private thermal plants under long-term PPAs,” it reasoned.
India Ratings feels excess power tie-up, ahead of requirement, increases the power purchase costs for discoms. “Also, thermal plants remain vulnerable to coal and water availability; thus certainty in these two linkages is hard to come by,” it added.
Meanwhile, the agency has maintained a stable outlook on transmission projects owing to high project availability and a stable receivables period for interstate transmission assets.