Punjab National Bank's capital adequacy falls plunges

At the end of March, 2018, the total capital ratio as per the Basel-III requirement declined to 9.20 per cent as against 11.66 per cent at the end of March 2017.

Published: 14th June 2018 03:27 AM  |   Last Updated: 14th June 2018 03:27 AM   |  A+A-

Punjab National Bank. (File | Reuters)

By Express News Service

NEW DELHI: Beset by a mammoth scam estimated to have had an impact of nearly Rs 14,000 crore, the Punjab National Bank (PNB) on Wednesday said that its capital adequacy ratio has fallen below that required by regulations.

At the end of March, 2018, the total capital ratio as per the Basel-III requirement declined to 9.20 per cent as against 11.66 per cent at the end of March 2017. On a consolidated basis, it slipped to 9.82 per cent as against 11.98 per cent during the same period. As per RBI norms, the total capital adequacy, including counter-cyclical buffer should be upwards of 11.5 per cent.

“...the capital position of the bank as at March 31, 2018 is below the regulatory requirement (including countercyclical buffer) of Reserve Bank of India, Hong Kong Monetary Authority (HKMA) is enhancing the Supervisory arrangements on our Hong Kong branch,” PNB said in a regulatory filing.

The erosion of capital can primarily be attributed to the over Rs 14,000 crore allegedly lost due to a fraud perpetrated by diamantaire Nirav Modi and associates through fraudulent letters of undertaking (LoUs) from one of the branches of PNB for overseas credit.

In the aftermath, the bank posted its largest-ever quarterly loss of Rs 13,416.91 crore for the January-March period, mainly on account of high provisioning due to the fraud. The bank paid Rs 6,586.11 crore to other banks to discharge its liabilities towards LoUs and Foreign Letter of Credits issued fraudulently and in an unauthorised manner to certain overseas branches of Indian banks through the misuse of SWIFT system of the bank, which was then not integrated with CBS. According to analysts, PNB financial position will get better in the coming quarters since it expects to gain Rs 8,000 crore from the recovery during the first quarter itself.

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