PNB, the second largest public sector bank in India, had detected the $1.8 billion fraud in one of its branches in Mumbai and Union Bank of India was among other banks that were said to have offered credit-based on letters of undertakings (LoUs) issued by PNB.
"The outstanding exposure related to the incident is approximately $300 million and the bank is fully secured by LoU/LC/other documents and fully confident to receive the payment," it said in a regulatory filing late on Thursday.
An LoU is in effect a guarantee issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.
The bank has also purchased some Buyers' Credit Assets from Axis Bank through Risk Participation as a part of normal international business practice.
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