1. PNB scam: Fraud nearly third of bank’s market cap, almost double the amount promised under recap plan

PNB scam: Fraud nearly third of bank’s market cap, almost double the amount promised under recap plan

"Fraudulent and unauthorised" transactions of Rs 11,363 crore were reported from a single branch of Punjab National Bank in Mumbai on Wednesday. The gigantic amount that nearly equals a third of bank’s market value of Rs 33,000 crore comes as a shock for the entire banking sector that is already facing immense pressure at the NPA front.

By: | Updated: February 15, 2018 10:32 AM
Punjab National Bank, finance ministry, Department of Financial Services, mumbai, Nirav Modi, diamond merchant Nirav Modi, public sector bank Uncovering of this fraud puts fresh doubts over the effectiveness of the bank recapitalisation plan launched by the government last year. (Image: IE)

“Fraudulent and unauthorised” transactions of Rs 11,363 crore were reported from a single branch of Punjab National Bank in Mumbai on Wednesday. The gigantic amount that nearly equals a third of bank’s market value of Rs 33,000 crore comes as a shock for the entire banking sector that is already facing immense pressure at the NPA front. The alleged fraudulent amount uncovered is more than double of Rs 5,473 crore, the amount that was promised under Rs 2.11 trillion bank recapitalisation plan announced by the government. The notification of this fraud to stock exchanges sent PNB shares plummeting about 10 percent on Wednesday, eroding nearly Rs 3,850 crore of shareholder value. PNB shares fell further today, and were trading at Rs 136.55, down 6.34 percent at NSE at the time of reporting.

Uncovering of this fraud puts fresh doubts over the effectiveness of the bank recapitalisation plan launched by the government last year, to look into the concerns over the growing bad loans in the account books of the public lenders. Now, other than resolving the NPA issue, the government may also need to look into improving governance standards across the banking industry. Sandip Sabharwal of asksandipsabharwal.com tweeted, “What kind of systems does a bank have, where as alleged a “Deputy Manager”, a person at the lowest rung with no decision making authority can sanction LOUs of Rs 11000 Cr. Tough to believe that the then top management was not in the loop.”

Considering the challenging scenario that the Indian banking sector is facing currently, uncovering of fraud will do no good going ahead. “Depending on the outcome of the fraudulent transactions and the money involved, it puts the burden squarely on India’s taxpayers. The only good that could come out of the affair would be some fresh consideration to implementing better practices,” Reuters writes in its report.

The entire matter has been already referred to the law enforcement agencies. The alleged fraudulent amount is more than double of the Rs 5,473 crore that Punjab National Bank was allocated under the Finance Ministry’s recapitalisation plan and it stands at 2.3 percent of the bank’s total advances of Rs 4.74 lakh crore as on December 31, 2017.

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  1. Suman Bhat
    Feb 15, 2018 at 11:08 am
    cogress looters should tell the nation where they hide Rs 12 lakh crores tax payers money looted during UPA period. 82 of NPA (non performing assets in banks ) are bcuz of misrule , corruption scams, huge loan to big ppl, mindless freebies, subsidy, Karz maaf UPA looters destroyed banking system and economy - those ppl who ask questions Modi for Demo and GST why not ask questions about looting of congress goons will fake gandhis answer
    Reply
    1. Rabindra Nath Roy
      Feb 15, 2018 at 11:39 pm
      Do you understand the english? The loan was not given but PNB stood guarantee for the amount that was to be paid to 30 of the Indian Banks and this sort of loan is very temporary that is normally it is to be repaid in 90 days, but the Modi's m,anaged this since then and till the time Bank itself discover the scam. Now the quesstsionis what was Modi Govt. doing all these 4 years following the footsteps of UPA? And Modi as allotted Rs 5 thousand plus crores as recapitalization of PNB.
      Reply

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