India’s biggest banking fraud has been detected in India’s second largest public sector bank Punjab National Bank. The fraud size is estimated at around $1.77 billion (Rs 11,400 crore). The banking fraud at Punjab National Bank was detected at a Mumbai branch. Punjab National Bank has said that it was the first one to detect and report it to the government agencies and based on which country-wide raids had been conducted on the whereabouts of culprits. The scam at Punjab National Bank involves “unauthorised transactions” of Letter of Undertaking between the bank and alleged diamond merchant Nirav Modi.
“The Bank has detected some fraudulent and unauthorised transactions (messages) in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions other banks appear to have advanced money to these customers abroad. The quantum of such transactions is $1,771.69 million (approx). The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land,” Punjab National Bank said in an exchange filing on Wednesday (14 February 2018).
Blown by the massive fraud, the share prices of Punjab National Bank had been hammered drastically in last two days. The stock of Punjab National Bank got depreciated about 21.4% over the course of last two days on NSE. Following the two-day slide in the shares of Punjab National Bank, about Rs 8,091.34 crore had been dropped from the market capitalisation of the bank. As per Thursday’s closing price of Rs 128.35, PNB held a market capitalisation of Rs 30,841.34 crore as against Rs 39,223.75 crore on Monday.
As the biggest banking fraud unravelled at PNB, we take a look at Rs 11,400 crore scam in numbers
- The supposed fraud is more than one-third of the market capitalisation of Punjab National Bank. PNB commands a market cap of Rs 30,841 crore at the end of Thursday (15 February 2018).
- The fraud amount is about Rs 800 crore less than the total interest earned by Punjab National Bank in October-December period of the financial year 2017-2018. (Total interest income in Q3 FY18 – Rs 12,175.48)
- The fraud amount is more than what all Punjab National Bank had spent in third-quarter of the financial year 2017-2018. (PNB’s total expense in Q3 FY18 – Rs 11,012.31 crore)
- The fraud amount is about Rs 10,000 crore higher than the net profit for the year ended 31 March 2017. (PNB’s net profit for the financial year 2017-2018 was Rs 1,324.8 crore)
- The fraud amount is nearly equal to one-fourth of the total reserves and surplus held by Punjab National Bank at the end of 31 December 2017. (PNB’s total reserves and surplus as at 31 December 2017 was at Rs 48,511.63 crore)
- The fraud amount is about Rs 5,000 crore more than the total worth of fixed assets held by Punjab National Bank at the end of 31 December 2017. (PNB’s has fixed assets worth Rs 6,377.11 crore as at 31 December 2017)
- The fraud amount is nearly one-fifth of the gross NPAs (non-performing assets) of Punjab National Bank at the end of 31 December 2017. (As at 31 December 2017, PNB’s gross NPAs stood at Rs 57,519.41 crore)
- The fraud amount is just Rs 2,900 crore less than the total earnings of Punjab National Bank in the October-December period. (PNB reported a net income of Rs 15,257.5 crore)
— PNB’s management address on Thursday —
In a press conference held on Thursday afternoon, the top management of Punjab National Bank assured that the bank is trying its best to take action against the alleged offenders. PNB’s chief confirmed that Nirav Modi had written to the bank regarding the repayment plan.
Billionaire diamond jeweller Nirav Modi’s firms – Diamond R US, Solar Exports, and Stellar Diamonds – have been accused of presenting a set of import documents to the branch, with a request to allow buyers’ credit for paying suppliers situated overseas and apparently conniving with two of the bank employees to access the credit based on the fake LoUs (Letters of Undertakings). “Nirav Modi has written to us on a repayment plan,” said Sunil Mehta, MD & CEO of Punjab National Bank.
“We detected the fraud in the third week of January this year and approached CBI on 29 January. Thereafter, an FIR was booked against the alleged culprits on 13 February,” PNB management added. Punjab National Bank was the first one to detect and report it to the government agencies and based on which country-wide raids had been conducted on whereabouts of culprits.