Punjab National Bank

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This is a collection of articles archived for the excellence of their content.

Contents

History

Lal Bahadur Shastri’s loan

Avijit Ghosh, Not just Nirav Modi, PNB had such customers too, February 21, 2018: The Times of India


Shastri’s Wife Repaid His Loan From Her Pension

Nobody knows whether runaway diamantaire Nirav Modi will ever repay the multi-million rupee loan he took from Punjab National Bank (PNB). But a car loan of Rs 5,000 taken by former Prime Minister Lal Bahadur Shastri from the same bank was repaid after his sudden death by widow Lalita from her pension, says son Anil Shastri.

“We went to St Columba’s School on a tonga. Once in a while we used the office car but my father did not allow us to use it regularly for any kind of private work. There was a demand at home that we should buy a car,” recalls Anil Shastri, a senior Congress politician.

The year was 1964. Following enquiries by VS Venkatraman, the special assistant to the PM, the Shastris came to know that a new Fiat costs Rs 12,000. The family only had Rs 7,000 in the bank. The Prime Minister applied for a loan of Rs 5,000 loan which was sanctioned the same day.

But soon tragedy struck the family and the nation. Shastri passed away on January 11, 1966 in Tashkent where he had gone to sign the declaration that resolved the 1965 war between India and Pakistan. “The loan remained unpaid. It was repaid by my mother from the pension she received after my father’s death,” says Anil.

The car was a cream colored 1964 model Fiat with the impressive number, DLE 6. It is now exhibited in the Lal Bahadur Shastri Memorial at 1, Motilal Nehru Marg, in the capital. Founded in 1894, PNB was inspired by the idea to start a swadeshi bank during the British Raj. Among its early board of directors was Lala Lajpat Rai, who played a distinguished role in India’s freedom struggle.

Frauds/ scams

2018/ ₹11,000-cr Nirav fraud: PNB missed warning signs

Sidhartha, How PNB missed warning signs to avert ₹11k-cr fraud, February 16, 2018: The Times of India


Accused Dy Manager Issued Unusual 365-Day Guarantee

In 2017, just before retiring from Punjab National Bank (PNB), Gokulnath K Shetty issued a 365-day letter of undertaking (LoU) or a guarantee that allowed Nirav Modi’s companies to access funds from other banks. The former deputy manager is at the centre of the Rs 11,300-crore fraud.

Typically, an LoU for a diamond trader is issued for 90 days. But, Shetty probably wanted to cover his tracks and ensure that the fraud, that had allegedly been going on since 2011, did not come to light until a year of his superannuation. However, the lid was blown off in the second half of January, when executives from Modi’s outfit approached the Brady House branch in Mumbai to seek a renewal of the facility. The PNB executive, who replaced Shetty, asked the company to cough up a hefty cash margin, prompting Modi’s people to disclose that they had never paid the bank in the past.

The disclosure triggered an internal probe by PNB’s executives in Mumbai, resulting in the unearthing of what may be India’s largestever banking fraud. PNB executives acknowledge that there were systemic lapses, and the bank should have noticed them earlier.

To begin with, Shetty was allowed to continue at the same branch and handle the same assignment for years. The norm is every Scale-1 officer should be moved to another desk every six months and should be shifted to another branch at least once in three years. By all accounts, PNB failed to follow its own guidelines.

The other is a system issue as the bank’s core banking solution was not connected with SWIFT, the international money transfer tool. This allowed Shetty to send messages via the fund transfer switch using his password. As there was no interconnection, the transactions were not reflected on core banking software. How no one noticed the messages on SWIFT remains a mystery, although bank executives said one or two frauds in the system are not unusual. They pointed out that a few years ago, PNB had to pay Indian Overseas Bank’s Dubai branch Rs 300 crore due to allegedly irregular messages sent via SWIFT even though the documents seemed to be in order.

When some of the allegedly fraudulent LoUs were issued, the bank also received fees from the company, a PNB executive said, something that should have raised an alarm.

While the bank is being blamed for the embezzlement, role of its internal auditors and even RBI’s inspection and audit team is under the scanner. In the coming days, more bank executives are expected to face action, with the government putting the blame squarely on PNB.

Losses

Q4/ 2016: highest loss in Indian banking history

The Times of India, May 19 2016

PNB's Rs 5,367cr Q4 loss bigges or Indian bank

Punjab National Bank, the third largest state-run lender, reported record quarterly losses of Rs 5,367 crore for the three months ended March, and it set aside more funds for potential losses from bad debt.

Bank MD and chief ex ecutive Usha Ananthasubramanian said the bank had seen a three-fold jump in provisions for non-performing assets, which added up to Rs 11,380 crore. This included Rs 385 crore for electricity distribution firms, whose loans have been restructured under a scheme overseen by the government, and Rs 166 crore loans extended to Punjab for foodgrains.

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