PNB Misrepresented Factual Position on LoUs to RBI: CBI Charge Sheet

Nirav Modi

This third largest PSB in terms of market cap posted a net loss of Rs 13,416.91 crore during fourth quarter ended March 2018, compared to net profit of Rs 261.90 crore in corresponding period of previous year and net profit Rs 230.11 crore in preceding quarter.

Ananthasubramanian, along with two EDs, has been charged reportedly for criminal breach of trust, cheating, and for causing wrongful gains to the companies and wrongful losses to the bank.

PNB on Tuesday said its losses widened to Rs 13,417 crore in the January-March 2018 quarter from Rs 262 crore in the same period past year.

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A similar fraud was detected in 2016, in which funds under the garb of LoUs were transferred in favour of a Hong-Kong-based company, purportedly issued by the Chandigarh branch of a nationalised bank to overseas branches of two other nationalised banks, including PNB.

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On May 14, the Central Bureau of Investigation (CBI), India's top investigative agency, filed a charge sheet in the case where diamantaires Nirav Modi and his uncle Mehul Choksi were accused of defrauding Punjab National Bank (PNB) of $2 billion (over Rs13,000 crore) between 2011 and 2017. Net NPAs, which is gross NPA minus provisions, jumped to 11.24 percent from 7.55 percent in Q3.

The pain on this account is not yet over for the bank: the bank is making the remaining provision of ₹7,178.42 crore during the first three quarters of FY19 in keeping with the RBI's directive.

PNB has cleared dues of Rs 65.9 billion to foreign branches of Indian banks to which it had issued these LoUs. The fraud was allegedly perpetrated despite the circulars issued by RBI, which was in the knowledge of senior officials of PNB.

Tighter central bank rules announced in February, which did away with half a dozen loan restructuring schemes, have led to banks reporting a surge in bad loans in the March quarter, and several of them reporting losses. During the day, it declined 6.26 per cent to Rs 83.80 - its 52-week low level. PNB's earnings will be pressurised as it will have to make enough provisions to deal with the scam-related payouts to other banks. Additionally, the bank will have to offer for non-performing loans as per the regulations laid down by the RBI to reclassify restructured accounts and recognize them as NPAs.

PNB said on Tuesday it had set aside a higher-than-required 71.78 billion rupees in the three months to March 31, or half of the total 143.57 billion rupees it owes other banks for the illegal guarantees.

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