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PNB scam: Bank to focus on internal audits, recovery, small depositors

Bank outlines multi-pronged strategy to strengthen internal controls in its EGM held on Friday

Somesh Jha  |  New Delhi 

Punjab National Bank, PNB

(PNB) has decided to increase the number of internal audits and increase focus on recovery of bad debts in the aftermath of the Rs 129 billion scam that hit the bank earlier this year.

The decisions were taken in an extraordinary general meeting held by PNB's top management on Friday to approve giving a matching portion to the government through preferential shares as a part of government's bank recapitalisation process. Government will infuse Rs 54.7 billion in in 2017-18 through recapitalisation bonds after which the government's stake in the bank will increase to 62.2 per cent from 57.1 per cent.

During the EGM, the top management reiterated to its stakeholders that the Delhi-based public sector bank will honour all the “bonafide” letters of undertaking. The bank is in a dispute with other Indian over the liability arising out of the scam. While has said that it will honour the commitments of LoUs worth Rs 129 billion based on an investigation by central agencies, other have maintained that is liable for the entire amount since LoUs were issued by them.

The bank management took questions from stakeholders on the alleged scam and chalked out a multi-pronged strategy in order to “tighten checks and balances on the system.”

“Frequency of internal audits will go up and as and when required, external auditors will also be utilised,” said in a statement.

The bank will focus on recovering bad loans by strengthening the war-room created for speedy recovery by deploying more people “with intensified field follow-ups and legal preparedness.“

The bank said it will start targetting small depositors and increase its focus on current and savings accounts (CASA). “The bank is already generating more than 40 per cent of its resources through CASA,” said.

It will hold customer, investor and town hall meetings as a part of its extensive reach out programme following the scam.

“Clarifying on questions being raised on the ongoing bank fraud case investigation, reassured its stakeholders, customers, partners and employees on the bank's capability and capacity to come out of this situation,” said.

Two employees at PNB's Brady House branch in Mumbai had issued fraudulent LoUs worth around Rs 129 billion for a group of companies belonging to and Mehul Choksi.

First Published: Sat, March 17 2018. 14:11 IST
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