PNB’s current and savings’ account (CASA) deposits stood at Rs 2.67 lakh crore.
The Punjab National Bank (PNB) scam worth Rs 12,700 crore seems to have impacted the bank’s business operations including bulk deposits and brokerage transactions as institutions wait for investigations to end.
This may see the bank taking a hit on their profitability for the January to March quarter, the fourth and the last quarter for 2017-18 which is usually a healthy quarter for most banks.
A senior executive with PNB said, “Some institutions have been wary of doing business. Some corporates were hesitant to park their deposits with us. We have not seen any withdrawal of business as such...Yes, this scam has scarred our image even among individuals to park their deposits.
“So this quarter may be weak. But we are hopeful this will pass. Being a government bank, some support should help things fall back in place,” the executive added.
The share of term deposits for the Delhi-based bank stood at Rs 3.80 lakh crore, around 54 percent of total domestic deposits, which stood at Rs 5.88 lakh crore, up 5.9 percent over the corresponding period a year ago.
PNB’s current and savings’ account (CASA) deposits stood at Rs 2.67 lakh crore.
The loan growth was at 17.2 percent as on December end 2017 as compared to the previous year.
“We have not got any business to buy or sell shares from PNB since the scam has been out,” said an official with a brokerage house, which otherwise did business worth Rs 1 crore on a daily basis with the firm.
On February 14, PNB informed the stock exchanges about the Rs 11,400 crore (later increased to Rs 12,700 crore) worth of fraud that took place at its Brady House branch in Mumbai, which had diamantaire Nirav Modi and his various company officials colluding with senior officials of the bank, receiving Letters of Undertaking (LoUs) without proper checks and securities.
According to PTI reports, the scam has also affected trade finance activities across the banking sector as lenders have become extra cautious, while the premium on Indian paper has shot up by 10-50 bps.
For PNB, the mammoth fraud may also see a hit on their capital raising plans even as PNB has announced Rs 5,473 crore capital raising from the government on preferential-issue basis.
Karthik Srinivasan, senior vice-president, ICRA ratings agency, said, “With the size of fraud, the bank is now more focused on cleaning up its balance sheet, so depending on how much knock they take, there will be pressure on capital. And to that extent, they would also be going slow on credit (lending). So, they would not need much deposits but yes, the capital towards provisions and hence it will impact their profits.”
PNB may also face PCA or the prompt corrective action by the Reserve Bank of India (RBI), which assesses banks on a bank’s capital adequacy ratio (CAR), net non-performing assets (NPAs) and return on assets (ROA).
The state-owned lender’s NPAs are already above the RBI threshold (6 percent) at 7.55 percent.
Currently, 11 public sector banks are under PCA for breaching largely the NPA and capital ratios.
