PNB's bad loan recovery of over Rs 77 bn in first quarter tops FY18 level

The remaining amount will be covered in the three quarters of the current fiscal year

Scam-hit PNB's recovery of over Rs 77 billion in bad loans during the first quarter in the current financial year has surpassed the total amount it recovered in the entire 2017-18 financial year, indicating that it has embarked on the turnaround path, the bank's top official has said.

The Insolvency and Bankruptcy Code (IBC) resolution process has greatly helped Punjab National Bank, which was hit by nearly USD 2 billion fraud allegedly carried out by jeweller Nirav Modi and his associates, he said.

"In the first quarter itself, 2-3 big accounts have been resolved. As a result, the bank has got over Rs 30 billion only through the resolution process," PNB Managing Director Sunil Mehta said.

During the quarter (April-June, 2018-19), two big accounts --Bhushan Steel and Electrosteel were resolved through the IBC process.

"Last financial year, the bank had made recovery of about Rs 54 billion. Against that we have done recovery of over Rs 77 billion in the first quarter itself. IBC played a big role in such huge recovery because two big accounts were resolved," he said.

Going forward, Mehta said, the resolution of other accounts including Essar Steel and Bhushan Power and Steel (BPSL) are expected to give good value.

Sharing details of the 12 accounts forming part of the first list, he said the bank had total exposure of Rs 120 billion in the 9 accounts out of 12.

Of the 9 accounts, he said, 5 stressed assets with exposure of Rs 90 billion are from the steel sector alone.

"In the second list, the bank has exposure in 20 accounts out of a total of 28 accounts. The total outstanding is Rs 65 billion and we expect these to be resolved during the current fiscal itself," he said.

That apart, Nirav Modi and his uncle Mehul Choksi, in connivance with certain bank officials, allegedly cheated PNB of about Rs 140 billion through the issuance of fraudulent Letters of Undertaking (LoUs).

A Mumbai branch of PNB had fraudulently issued LoUs for the group of companies belonging to Nirav Modi since March 2011.

The total number of LoUs issued to the companies of Nirav Modi, his relatives and the Nirav Modi Group are 1,213, and to Mehul Choksi, his relatives and the Gitanjali Group are 377.

With regards to the provision made for the loss incurred on account of Nirav Modi fraud, the bank provided Rs 71.78 billion, 50 per cent of the total amount of Rs 143 billion in the fourth quarter of 2017-18.

The remaining amount will be covered in the three quarters of the current financial year.

PNB paid Rs 65.86 billion to other banks to discharge its liabilities towards Letters of Undertakings (LoUs) and Foreign Letters of Credit (FLCs) issued fraudulently and in unauthorised manner to certain overseas branches of Indian banks through the misuse of SWIFT system of the bank, which was then not integrated with CBS (Core Banking Solution).