Fraud Hit Punjab National Bank Reports Biggest ever Quarterly Loss for an Indian Lender


Punjab National Bank, which was recently hit by the biggest scam in the History of Indian banking, has reported a quarterly loss of INR 13,417 Crores for the January-March period. Reportedly, this is the biggest ever quarterly loss for an Indian lender as the state-run bank booked provisions to cover the fraud.

In February, Punjab National Bank disclosed that two jewelry groups had defrauded the lender of more than 2 Billion Dollars and raised credit overseas from other Indian banks by issuing fake guarantees with the help of rogue PNB staff. Popularly known as the Nirav Modi fraud case, the scam was unearthed at Mumbai’s Brady House branch.

The bad loans mounted up, leading to an increase in the overall quarterly loss. Last year, the bank had earned a profit of INR 2161.9 Crores in the same quarter.

While the police charged 22 people on Monday, including former PNB head, 2 current Executive Directors; more people are yet to be charged in the coming week. PNB said that it had kept aside an amount of INR 7,178 Crores which is half the amount it owes to other banks for the illegal guarantees. This, in turn, tripled its total provisions to INR 20,353 Crores.

RBI has allowed the bank to spread the fraud-related provisions over four quarters. PNB plans to set aside the remaining amount over three quarters beginning from April 1.

It’s important to note that the losses suffered by the bank are triple the estimated figures predicted by analysts which is a big concern. Analysts say that these losses coupled with rising bad debts can weaken the bank’s capital reserves to such an extent that might threaten the growth prospects of the lender.

Soon after the reports of the quarterly loss, the bank shares opened at 89 and even touched the 83.8 mark, registering a 52-week low amount. Besides, from the time the Nirav Modi case came to light, the PNB share price has fallen more than 40% this year.