KOCHI: The State Bank of India has an exposure of $ 212 million (nearly Rs 1,360 crore) linked to the Letter of Undertaking (LoU) issued by the Punjab National Bank (PNB) to diamond merchant Nirav Modi. SBI chairman Rajnish Kumar told reporters here on Friday that the bank does not have any direct exposure to Nirav Modi, facing allegations of swindling over Rs 11,000 crore from the PNB using the LoU facility.
According to Mr Kumar, the SBI has lent $212 million to Nirav Modi based on the LoU issued by the PNB. He, however, said that the largest lender in the country has only a minor exposure in Gitanjali Gems belonging to Mehul Choksi, uncle of Modi. The entire exposure to the gem and jewellery industry by the SBI is less than one percent of the total lending portfolio of the bank. “We have a loan book of nearly Rs 16 lakh crore and out of this, the gem and jewellery sector accounts for about Rs 13,000 crore,” he said.
He also mentioned that the bank has been very careful in its exposure to the gem and jewellery sector and that further caution would be exercised in the matter by strengthening the risk mitigation measures. Answering a barrage of questions on the risk factors facing the banking sector in the wake of the PNB scandal, Mr Kumar said the risk is in the very nature of banking and every bank will have to deploy effective systems and practices to avoid risks.
The SBI has a robust system of risk mitigation in the form of audits at various levels and rotation of officers holding sensitive positions. “We have a policy of rotation of officials. We don’t keep a person for more than three years in a position and in case of certain sensitive positions additional care will be taken,” he said. Stressing the importance of creating awareness about the risk factors, he said that strict monitoring of the standard operating procedures should also be maintained at all levels. “Despite taking such precautions, the possibilities of breach of trust by individuals may happen and in such cases we should be able to detect the same and initiate remedial action,” he said.
