WHEN HASTE IS WASTE

PNB seems to have shot itself in the foot when it went to town dumping all its woes at Nirav Modi’s doorstep

Punjab National Bank’s haste in announcing the Nirav Modi episode as a $1.77 billion scam—instead of the current outstanding $751 million (`4887 crore)—may have caused serious collateral damage to itself and the consortia of three dozen banks that did business with Modi and his uncle Mehul Choksi.

By including all the Letters of Undertaking ever issued to Nirav Modi’s companies, PNB may have covered its flanks but inadvertently suggested Modi had run away with $1.77 billion (since raised to $1.97 billion). CBI’s FIR instead said Modi’s outstanding against LoUs is only around half of that - ` 4,887 crore. With that error of judgement, PNB may have risked not just its funds in the hands of Nirav Modi and Mehul Choksi’s companies but also that of other banks’ outstanding loans to their companies.

Together, Modi and Choksi took another ` 13,147 crore in loans from various consortia of banks that did business with the duo. In its haste to announce nearly all LoUs ever issued (true they would all be classified as fraudulent) totalling $1.97 billion (`12,800 crore) as the scope of the scam, PNB may have inevitably caused a media frenzy and a hard regulatory and investigative clampdown that has shuttered all the businesses of Modi and Choksi. As a result, PNB may have shot itself in the foot. It has not just jeopardised the current outstanding against the LoUs, but may have pushed the remaining ` 13,147 crore towards NPAs since Modi and Choksi will surely not be able to repay the loans, now that their businesses are shut. Call it ‘Haste is Waste’.