RBI to defer putting lending, expansion curbs on PNB till Q1 results

Andhra Bank, Punjab and Sind Bank, and Canara Bank, too, are likely to make a similar presentation before the regulator

The Reserve Bank of India (RBI) may defer putting lending and expansion restrictions on Rs 143 billion fraud-hit Punjab National Bank (PNB) till the first-quarter results of 2018-19 are out.

The regulator has conveyed to the management of the bank in a recent meeting that it will examine, after looking at the June quarter results, whether PNB’s financial conditions warrant putting it under the prompt corrective action (PCA) framework.

“The regulator will take a call after the June-ended quarter results (are declared). The regulator has told PNB to improve recovery, shed risk-weighted assets, and focus on reducing expenditure till then,” an official said.

PNB, led by its Chief Executive Officer and Managing Director Sunil Mehta, made a presentation on its revival plan to the RBI last Monday, requesting the regulator to defer action under PCA till December, according to sources.

Most public sector banks (PSBs) declare their financial results for the April-June period between the end of July and beginning of August. So PNB may not face any business restrictions till at least August if the regulator has its way.

“Looking at the PCA framework, PNB, like a few other banks, fulfils a couple of important parameters to be added to the list. But PCA will not affect business operations as such. In the present situation, no bank is looking at aggressive credit growth, looking at branch expansion or aggressive hiring, and these are a few things that the banks have to go slow on under PCA,” said Karthik Srinivasan, senior vice-president—group head, financial sector ratings, Icra, adding, “it does not change life for any bank unless the RBI puts a specific lending restriction.” According to a recent report by Credit Suisse, with net non-performing assets (NPAs) over 8 per cent and common equity tier levels down to less than 6 per cent, PNB and Andhra Bank are likely candidates for PCA. Under RBI rules, fulfilling any of the three conditions — net NPA levels above 6 per cent, two years of consecutive losses, or the capital adequacy ratio below the regulatory requirement — could put banks under PCA. PNB suffered the highest ever loss by any domestic bank, at Rs 134 billion, mainly due to the Rs 143-billion swindle on account of fraudulent loans to jewellery firms belonging to Nirav Modi and Mehul Choksi and the RBI’s new provisioning norms. Last week, on the directives of the finance ministry, apart from PNB, Union Bank also met the regulator, urging a deferment of PCA by citing a revival plan.

Rs 114-bn PNB fraud gets bigger: Bank says total dues can be Rs 13 bn more

Punjab National Bank detected the fraud wherein Nirav Modi and associates allegedly acquired fraudulent letters of undertaking

Business Standard : The fraud-hit Punjab National Bank (PNB) on Monday reported an additional Rs 13 billion (Rs 1,300 crore) unauthorised transactions, taking the estimated quantum to Rs 126 billion (Rs 12,600 crore) in the scam related to diamond trader Nirav Modi and his uncle Mehul Choksi who is the owner of Gitanjali Gems.

In a 11.22 pm late night filing with the stock exchanges on Monday, the bank said, "In continuation to our filing with stock exchanges on February 14, 2018, we have to inform that quantum of reported unauthorised transactions can increase by $204.25 million."

At the current exchange rate, the amount comes to around Rs 13.23 billion (Rs 1,323 crore).The latest announcement from the public sector lender assumes significance against the backdrop of the probe going on into the Rs 114 billion (Rs 11,400 crore) scam, which is already one of the biggest in the Indian banking sector.

On February 14, the bank had detected the fraud wherein billionaire jeweller Nirav Modi and associates had allegedly acquired fraudulent letters of undertaking (LoUs) from one of the branches of the PNB for overseas credit from other Indian lenders.

The Central Bureau of Investigation on Monday said it questioned PNB Executive Director K V Brahmaji Rao, two General Managers and a retired official in connection with its probe into the multi-crore fraud.

The Income Tax Department also said it had attached 66 more bank accounts related to the accused Mehul Choksi.

The scam was perpetrated by way of fraudulent Letters of Undertaking (LoUs) generated in the name of Punjab National Bank.the amount of fraudulent transactions could be Rs 13 billion (Rs 1,300 crore) more than the current estimate of about Rs 114 billion (Rs 11,400 crore).

Tirumala temple deposits 1311 kg gold in PNB under gold monetisation scheme

The Tirumala temple – also popularly known as Balaji temple – in Tirupati, one of the richest in the country, has invested 1,311 kilogrammes of pure gold bars of 0.995 fineness in Punjab National Bank (PNB), even as the temple board wants more changes in the central government’s Gold Monetisation Scheme(GMS).
 
Among banks, PNB has offered the highest quotation of interest rate of 1.75% per annum under the short-termdeposit scheme for a period of three years under the GMS.
 
Tirumala Tirupati Devasthanam (TTD's') Executive Officer Dr D Sambasiva Rao said the temple board has written to the Reserve Bank of India as well as the central government to amend the gold monetisation scheme. 
 
“If we get a green signal from them, then we could be able to deposit the existing deposits as well as new ones under medium- and long-term schemes”, he added.
 
Short-term deposits are redeemed in gold which suits the temples. TTD is willing to put gold under medium- (5-7 years) and long-term (10- 12) years’maturity in which depositors are to be paid the rupee equivalent of the amount of gold deposited upon maturity. Now the RBI has allowed banks to offer to redeemed deposits in gold which banks have to implement by changing the structures of the schemes.
 
Tirumala temple gets about one tonne of gold every year as offerings from devotees. This gold is typically sent to refineries or the government mint for conversion to gold bars, which are then deposited in banks.Read More.