In a major relief to public sector Punjab National Bank (PNB), the Reserve Bank of India (RBI) has accepted its request to make provisioning for the losses incurred from the Rs 13,000 crore fraud spread over four quarters.
In a written reply to Parliament, Shiv Pratap Shikla, Minister of State for Finance stated that the state-owned PNB is staring at losses worth Rs 14,500 crore for the financial year 2017-18.
This comes after the lender informed the stock exchanges and the Central Bureau of Investigation (CBI) that some of its employees had connived with companies owned by Nirav Modi and his uncle Mehul Choksi to issue fraudulent letters of undertaking to borrow funds from foreign branches of other Indian banks.
In the past, the Central bank had allowed some banks to spread provisioning over a period of time, sources said. PNB has also agreed to pay the counter-party banks for any loss from the fraud.
The decision will provide relief to PNB, which would otherwise have to put a quarter of its net worth at risk. PNB’s profit and overall asset quality are expected to take a hit.
PNB CEO Sunil Mehta on Wednesday said the bank would recover its losses from the recent letters of undertaking (LoU) fraud within six months.
The bank has bad loans of Rs 57,000 crore. The regulator has brought down provisioning for NCLT cases from 50 per cent to 40 per cent, hence, the management expects resolution of some cases in steel sector through the Bankruptcy Code which will in turn provide cushion to the bank.
The lender earlier said that it will honour all 352 letters of undertaking and foreign letters of credit worth Rs 6,500 crore maturing with seven banks on or before 31 March.
PTI adds: A group of around 17 parties, including the Congress and the TDP, today staged a protest and formed a human chain in the Parliament Complex over various issues such as the “failure” of the NDA government to run Parliament and grant special category status to Andhra Pradesh.
Leaders of the parties assembled near the statue of Mahatma Gandhi and raised slogans against the government over banking scams, rising atrocities against Dalits, sealing of commercial establishments in Delhi, and non-grant of special category status to Andhra Pradesh.
Leading the protest was UPA chairperson Sonia Gandhi and Congress president Rahul Gandhi.
Leaders of the TMC, Left parties, NCP, DMK, Samajwadi Party, BSP and the TDP, which severed ties with the BJP recently, were present at the protest.
“Today 17 opposition parties and even those who were part of the NDA (till recently), formed a human chain around Parliament. It was against the non-performance of the government and its failure on different issues,” Leader of Opposition in Rajya Sabha Ghulam Nabi Azad said.
The protest lasted over half-an-hour. The Opposition leaders alleged that they wanted to raise key issues in Parliament.