Fraud-hit PNB recovers Rs 11,378 crore in first 5 months of financial year

The NPA recoveries of around Rs 11,378 crore in the first five months of this fiscal year has improved the Punjab National Bank's chances of returning to profitability soon. The bank's data reveal the recovery this year is far more than the previous year's figures. A major factor that helped the bank get back the maximum amount this fiscal is the Insolvency and the Bankruptcy Code (IBC). The bank was able to recover around Rs 8,445 crore in the April-June quarter alone, which is over 23 per cent of all recoveries made during the period. PNB recovered around Rs 5,618 crore in FY18, while Rs 5,643 crore in the previous year.

The Punjab National Bank was hit by India's biggest banking scam worth Rs 13,700 crore, which involves diamond businessman Nirav Modi and his partner Mehul Choksi. The fraud dented the bank's image but now it has been successful in avoiding the Reserve Bank of India's harsh prompt corrective action by recovering money from many defaulters.

A report published in Financial Express said the bank has set up a dedicated stressed asset vertical in this fiscal and deployed as many as 3,000 employees to pursue recovery from various defaulters. The state-owned bank would be able to realise around Rs 3,081 crore from the first successful NCLT resolution through the IBC concerning Tata Steel and Bhushan Steel. Its other major recoveries include Rs 335 crore from Eletrosteel and Rs 110 crore form Monnet Ispat. One-time settlements with Shree Sidhbali Ispat (almost Rs 107 crore), GTL (Rs 84 crore) and Indo Synthetics (Rs 52 crore) also contributed to the PNB's recovery plan.

The bank now eyes another big recovery from Bhushan Steel and Power, which owes a consortium of banks, including the PNB, around Rs 45,000 crore. Bhushan Steel and Power was among the 12 non-performing accounts referred by RBI for NCLT proceedings. The National Company Law Appellate Tribunal will hear the case on September 24. Concerned over mounting bad loans, the RBI has suggested a slew of measures to improve the health of the state-owned banks in India. These measures include improving recoveries and implementing reform measures, and infusing capital to increase their capital base.

With regards to a provision made for the loss incurred on account of the Nirav Modi fraud, the bank has already provided over Rs 7,178 crore, which is 50 per cent of the total fraud amount. Of this, Rs 6,586.11 crore was paid to other banks to discharge its liabilities towards Letters of Undertakings (LoUs) and Foreign Letters of Credit (FLCs) issued fraudulently.

(Edited by Manoj Sharma)