"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.
“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.