Q4 Results: Fraud-Hit PNB Reports Rs 13,417 Crore Loss 

Punjab National Bank reported the biggest-ever quarterly loss in Indian banking history, partly a fallout of the Rs 14,000-crore fraud involving jewellers Nirav Modi, Mehul Choksi and their firms. The Reserve Bank of India’s new stressed asset framework also added to the bank’s pain.

The bank said that provisions worth Rs 3,120 crore have been made against accounts where stressed asset schemes were under implementation. The RBI, in a February circular, had withdrawn existing stressed asset schemes and asked banks to re-classify these accounts as bad loans if the implementation of these schemes was not yet complete.

On account of volatility in bond prices, the bank made a provision of Rs 741 crore but it chose to defer provisions of Rs 1,088 crore to subsequent quarters. This has been permitted by the RBI.

Overall, the bank’s provision coverage ratio stands at 58.4 percent.

As a result of the high provisions, the bank saw its capital adequacy ratio dip below the minimum laid down by Basel-III norms. It fell to 9.2 percent compared to the regulatory requirement of 11.5 percent. The core equity tier-1 ratio of 5.96 percent is marginally above the regulatory minimum of 5.5 percent.

Accounting For The Nirav Modi Fraud

The total amount involved in the fraud now stands at Rs 14,347 crore, said the bank. This includes credit given out against Letters of Undertaking and amounts under other credit facilities given to entities related to the Nirav Modi group.

According to the notes accompanying the earnings release:

• Liabilities worth Rs 6,586.1 crore were paid by the bank on account of LoUs that matured as of March 31, 2018.
• The bank created liabilities worth Rs 6,959.8 crore for LoUs that come due after March 31, 2018.
• The bank has made provisions of Rs 7,178 crore—amounting to 50 percent of the fraud amount. The remaining would be provided for over three quarters.

Shares of the fraud-hit lender fell as much as 5.8 percent to Rs 84 apiece after the results announcement. The stock has fallen 47.6 percent so far this year compared to a 5.2 percent rise in the benchmark S&P BSE Sensex Index.