PNB WILL HAVE TO CLEAR MESS

30 banks may have lost money

The Punjab National Bank has exuded confidence that it will overcome the fraud and make the full recovery of the defrauded Rs 11,400 crore.

PNB Managing Director and Chief Executive Officer Sunil Mehta told a Press conference that the bank is already in the mode of recovery and it will protect the financial interests of all concerned banks.

He did not give names but a word has been put out that some 30 banks may have lost money. The amount in the swindle is expected to be many times more when an audit is conducted by all these banks.

The RBI, it is understood, wants the PNB to clear the entire amount of Rs 11,400 crores that it owes to other banks in the fraud. Not doing so could lead to turmoil in the financial markets as the trust factor that is integral to the functioning of the banking industry will be undermined, sources privy to these discussions said.

The PNB, which is short of funds, has in turn sought the intervention of the government to sort out the mess, they added.

“The RBI as made its stand very clear that the PNB is liable to pay dues to peer banks,” said one of the bankers present at the meeting. “If PNB does not pay up, it will lead to double provisioning-- both PNB and 30 other banks will have provide for the huge loss.”

By paying the other lenders, only the balance sheet of PNB will suffer in terms of

losses while the other banks will not have to make provisions. Bankers fear that payments from PNB will be delayed and that the finance ministry will have to make some intervention in this matter. “If one bank fails to honour the claims of another bank, how will the system work?” said the other banker cited above.