PNB to provide ~35 billion for fraud loss last year
Punjab National Bank (PNB) will make a provision in its 2017-18 balance sheet for a fourth of the ~140 billion estimated in losses from the alleged fraud linked to companies led by jewellers Nirav Modi and Mehul Choksi.
The Delhi-based lender’s board of directors is to meet here on Tuesday to approve the annual financial results.
The announcement of the results is set to be a low-key affair; a press conference is unlikely, in a departure from the past. The board also met on Monday and “took up routine matters,” a senior executive said.
On Monday, Executive Directors Sanjiv Sharan and K V Brahmaji Rao were removed from the board on a direction from the central government, based on the Central Bureau of Investigation’s charge sheet in the fraud case. Neither attended the meeting, according to sources.
Last month, Sunil Mehta, managing director and chief executive, had told Business Standard that the Reserve Bank (RBI) had given the bank “some forbearance” in the fraud case, “so we can split it (the losses) into four quarters to avoid strain on capital requirements”.
As a result, the bank is allowed to spread its losses without debiting the amount not provided for in the March quarter from reserves, as required under the RBI’s guidelines.
In January, PNB had reported the ~140-billion fraud related to issue of letters of undertaking — a loan instrument — availed of “fraudulently” by companies belonging to Nirav Modi and Choksi. PNB had declared both sets of accounts fraudulent, after reporting the matter to investigating agencies.