Aftermath of Nirav Modi fraud: PNB recovers record Rs 11,378 in 5 months

Fraud-hit Punjab National Bank (PNB) recovered a record Rs11,378 crore from defaulters in the first five months of this fiscal, which is more than the state-run lender’s total recovery in the two years through 2017-18, according to the bank’s data.

Desperate to return to profitability and avoid featuring on the Reserve Bank of India’s watchlist after record losses last fiscal, mainly due to the Rs14,357-crore fraud involving jewellers Nirav Modi and Mehul Choksi, PNB has stepped up efforts to get back money from defaulters. It had made a recovery of Rs5,618 crore in the entire 2017-18 and Rs 5,643 crore in the previous year.

While the bank has set up a dedicated stressed asset vertical this fiscal and deployed as many as 3,000 employees to pursue recovery from various defaulters, its unprecedented efforts were duly bolstered by the emergence of the Insolvency and the Bankruptcy Code (IBC).

PNB was one of the biggest beneficiaries of the acquisition of debt-laden Bhushan Steel by the Tatas through the insolvency process, as it received Rs 3,081 crore. It recovered almost `335 crore from Electrosteel and Rs 110 crore from Monnet Ispat through the IBC.

It also got back money from a number of other accounts using other modes such one-time settlements with borrowers.

These defaulters include Shree Sidhbali Ispat (almost Rs107 crore), GTL (Rs 84 crore) and Indo Rama Synthetics (Rs 52 crore). It next eyes the resolution of Bhushan Power and Steel. The National Company Law Appellate Tribunal will hear the Bhushan Power case on September 24 on the eligibility of various bids.

The finance ministry has already read the riot act to all the public sector lenders to improve recoveries, along with implementing a set of other reform measures, and boost business, even though it has promised infusion to shore up their capital base and enable them to meet regulatory requirements. The overall recovery of all the 21 public sector banks (PSBs) stood at Rs 36,551 crore, almost a half of the total they had recovered in the entire 2017-18. PNB, however, seems to have left almost all its PSB peers behind. In fact, its recovery of `8,445 crore in the June quarter was 23% of the total recovery made by all PSBs.

The record high recovery comes at a time when the bank is striving to leave the ghost of the scandal behind even though the fraud has exacerbated its non-performing asset (NPA) ratios and caused net losses. Its net NPAs stood at 10.58% as of June, against Bank of Baroda’s (BoB’s) 5.4% and Canara Bank’s 6.91% (which are two of the large, and relatively strong, nationalised banks at the moment).

However, on certain other crucial parametres, PNB beat its peers. For instance, at 42.6%, the share of its current account savings account (CASA) in total deposits as of June was better than BoB’s (40.8%) and Canara Bank’s (32.4%). A larger CASA-to-deposits ratio suggests higher potential to generate profits, as the bank is getting money at lower costs due to relatively low interest outgo on such accounts.

Similarly, PNB’s operating profit grew as much as 30.4% in the April-June period from a year before (despite a net loss), against BoB’s 13.5% and Canara Bank’s 18.6%. Its operating expenses, in fact, dropped 17.3% in the June quarter from a year before, while BoB’s rose 9.3% and Canara Bank’s 18.5%.