India central bank turns up heat on lenders after $ 2 billion loan fraud

India's central bank has asked commercial lenders to provide it with details of all letters of undertaking - a form of credit guarantee at the centre of an alleged $2 billion fraud - issued by them in the past several years, according to four bankers who have seen the directive. The regulator is ratcheting up pressure on lenders, increasing its scrutiny and laying down deadlines for them to fix gaps in their systems, in the aftermath of the country's biggest bank fraud.
Two jewellery groups were accused last month of defrauding state-run Punjab National Bank (PNB) of more than $2 billion, mostly through fraudulent guarantees based on letters of undertaking (LoUs) issued by rogue bank employees that they used to raise credit overseas. The key accused in the case have denied any wrongdoing.