India's Punjab National Bank posts near $2 bln quarterly loss

CBI files chargesheet in Nirav Modi case names former PNB chief other top officials

CBI files chargesheet in Nirav Modi case names former PNB chief other top officials

"Their capital is very low, and a bank needs it to sustain growth", said Yuvraj Choudhary, an analyst at Mumbai brokerage Anand Rathi, who said PNB's reported loss was more than triple his estimate, calling it a "major concern".

Therefore, PNB stated that Bank has made higher than required provisions @ 50% amounting to Rs 7178.42 crore and remaining provision of Rs 7178.42 crore will be made during the first three quarters of the ensuing financial year in terms of RBI's dispensation.

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After the IOB fraud had surfaced, the RBI had issued guidelines and circulars to prevent such frauds in the banks which were allegedly not implemented in PNB in its entirety, they said.

For the unversed, the PNB in February detected the multi-crore scam, wherein Diamantaire Nirav Modi and his uncle cum business partner Mehul Choksi had allegedly cheated the bank to the tune of Rs. 114 billion, with the purported involvement of a few employees of the bank. The balance amount would be provided for over three quarters.

Companies owned by Nirav Modi and Choksi of Gitanjali gems availed loans from worldwide branches of other banks based on letters of undertaking (LoU) issued by several PNB employees.

Hours after the CBI filed the chargesheet against the fraudstars, the DFS (Department of Financial Services) has directed the directors of PNB and Allahabad Bank to divest all the powers of the officers, who are accused in the case.

"The moment I have definitive information either from the regulation side, supervision side or investigation side, the government will not hesitate in taking action to protect people's trust in the banking system", he said.

The bank created liabilities worth Rs 6,959.8 crore for LoUs that come due after March 31, 2018.

Punjab National Bank posted a record loss of Rs13,416 crore in the fiscal-fourth quarter.

The bank's share value declined by 6.10% to Rs 83.85 per share after the announcement of its quarterly results. Provisions for bad loans stood at Rs 16,203 crore compared to Rs 2,996 crore in the preceding quarter.

The latest quarter was weighed down by the part provision of ₹7,178.42 crore that the bank made for the Nirav Modi-perpetrated fraud. The February 12 circular from the RBI scrapped six stressed non-performing asset (NPA) restructuring mechanisms such as Corporate Debt Restructuring, Strategic Debt Restructuring (SDR), Scheme for Sustainable Structuring of Stressed Assets (S4A) and Framework for Revitalizing Distressed Assets, Joint Lenders Forum and the 5/25 loan scheme, among others.