Nirav Modi Impact: PNB to take on loan defaulters, NPA accounts

PNB and Nirav Modi

New Delhi, June 25 :After billionaire Nirav Modi executed a $2 billion PNB fraud, Punjab National Bank has implemented new strategy to strengthen the recovery process by establishing loan recovery cells in 6,900 branches spread across the country.

On June 1, the bank has diverted all its resources including energy and manpower to create loan recovery cells.Indian Express reported that the bank diverted 25000 of its employees from other operations to the recovery cells in 6,900 branches spread across the country to recover bad loans so as to meet the target set for the quarter ended June 2018.

The bank has managed to recover Rs 7,000 crore worth of bad debt in this period against a target of Rs 8,000 crore. In comparison, the bank recovered Rs 5,617 crore in the whole of financial year 2017-18.

To boost the recovery process, the bank has also given additional powers to branches to resolve recovery cases. “Each branch has been given powers to decide on one-time settlement (OTS) of cases up to Rs 25 crore. This is helping decentralise and speed up recovery. Every branch has a recovery vertical to intensify recovery efforts,” Indian Express quoted sources as saying.

This banking fraud not only raised concerns about the Indian banking sector but has had and will continue to have devastating effects on overall Indian economy.

Former RBI governor Y V Reddy has slammed the government for the multi-billion fraud at state- run Punjab National Bank (PNB) and said as the owner of public sector lenders, it is answerable to taxpayer losses rising out of such financial scams.

In February this year, PNB detected a over Rs 130 billion fraud allegedly involving diamantaire Nirav Modi and his uncle Mehul Choksi, a billionaire jeweller, at one of its branches in Mumbai

He was speaking on the topic ‘Keeping Banks Safe’.”The (PNB) fraud is of such a magnitude that it affects the credibility of the RBI in ensuring the trust of people in banking. To this extent, it has to review its own regulatory and supervisory practices,” Reddy said.

While a majority of the recovery proceedings of Rs 7,000 crore would be diverted towards provisioning adjustments, the bank is expected to add around Rs 3,000 crore to its profits in the June quarter, sources said.

Recently, the bank  received nearly Rs 3,500 crore form the resolution of Bhushan Steel and Electrosteel under the Insolvency and Bankruptcy Code

According to sources, the bank is likely to receive over Rs 3,300 crore from the likely resolution of Bhushan Power, Essar Steel, Ruchi Soya and Andrak Aluminium under the IBC.

Last month, PNB posted a net loss of Rs 13,416.91 crore for the January-March quarter, the biggest ever by any domestic lender, as provisions against expected loan losses tripled along with an across-the-board deterioration in performance.



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