The entire provision for the scam was completed in March itself. It was undertaken in tranches of Rs 7,500 crore each in March 2019
Punjab National Bank (PNB) has set aside Rs 16,500 crore as provisions for its exposure to the letter of undertaking (LoU) scam by diamantaires Nirav Modi and his uncle Mehul Choksi, which came to light in 2018. Provision is the capital that the bank has to set aside to cover any losses until the money is recovered from an asset sale or other processes.
"The entire provision for the scam was completed in March itself. It was undertaken in tranches of Rs 7,500 crore each in March 2019. We have also won some cases in the Debt Recovery Tribunal (DBT) as well of the group," Sunil Mehta, managing director and chief executive officer of the bank, said in a media interaction.
The Nirav Modi scam was one of the biggest frauds to have hit India's banking system and was perpetrated by employees issuing LoUs for buyers' credit to entities belonging to Nirav Modi and Choksi's Gitanjali Group. PNB had issued a total 41,178 LoUs since 2011. Out of these, as many as 1,590 were given to Nirav Modi and Mehul Choksi and their associates.
CLEANING BOOKS
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- The entire provision for the scam was completed in March itself. It was undertaken in tranches of Rs 7,500 crore each in March 2019
- PNB reported a net profit of Rs 1,018 crore in first quarter
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Last week, state-owned PNB returned to the black after it reported a net profit of Rs 1,018.63 crore in the first quarter of this fiscal. The bank posted a net loss of Rs 940 crore during the corresponding April-June period of 2018-19. In the last quarter of fiscal ended March 2019, the bank had registered a net loss of Rs 4,749.64 crore. The bank is also planning to go for a Rs 5,000 crore rights issue or a qualified institutional placement and expects to make a profit of Rs 3,500 crore during the year.
"We will tap the markets may be in the third quarter once it stabilises. We expect to get about Rs 7,000 crore from two accounts in the NCLT – Essar Steel and Bhushan Power and Steel. The bank is also looking at getting back Rs 1,000 crore from the sale of non-core assets," Mehta said.
On a sequential basis, PNB's asset quality deteriorated, with its gross non-performing assets (NPAs) as a percentage of total advances rising 99 basis points to 16.49%. Its net NPAs stood at 7.17%, up 61 bps sequentially. PNB's cash recoveries and upgradation in the June quarter stood at Rs 2,305 crore and Rs 1,554 crore, respectively.
The bank has extended its one-time settlement scheme (OTS) for the remaining part of the financial year so that the smaller corporate account holders can settle their dues. "We have recovered Rs 2,100 crore under this scheme from over two lakh accounts with a haircut of 50%," Mehta said.
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Last week, state-owned PNB returned to the black after it reported a net profit of Rs 1,018.63 crore in the first quarter of this fiscal. The bank posted a net loss of Rs 940 crore during the corresponding April-June period of 2018-19. In the last quarter of fiscal ended March 2019, the bank had registered a net loss of Rs 4,749.64 crore. The bank is also planning to go for a Rs 5,000 crore rights issue or a qualified institutional placement and expects to make a profit of Rs 3,500 crore during the year.
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