Responding to reports of undertaking buyer's credit transactions with PNB, Axis Bank said in the normal course of business, it carries out such transactions against letters of undertaking (LoUs) issued by other banks through its overseas branches.

"These amounts are then credited to the LoU issuing bank's Nostro accounts. Axis Bank has in the past undertaken such transactions with PNB against their authenticated SWIFT LoUs," it said in a filing to the stock exchanges on Thursday. SWIFT is a messaging network used by banks.

"Axis Bank is also an active participant in the secondary market for such transactions, and the bank has sold down all of the referred transactions," it added.

Buyer's credit is availed by an importer (from India) from overseas banks for the payment of imports. This credit (in the case of precious metals, the duration is 90 days) is provided on the basis of an LoU issued by the importer's local bank.

Meanwhile, an official of Allahabad Bank - which was involved in five of the reported transactions with combined value of $26.63 million - said, "The due diligence in this case should have been done by PNB. From our bank, the buyer's credit exposure was taken against the unconditional and irrevocable guarantee of payment in the LoU. We are not directly dealing with the importer customer. The onus of repayment is with PNB."

The official said Allahabad Bank has already raised its claim as the payments started to default from January.