This net loss of PNB is the biggest ever by an Indian lender as the state-run bank booked provisions to cover a Rs 13,400 crore fraud that surfaced in January this year. PNB was allegedly defrauded by diamantaire Nirav Modi and his uncle Mehul Choksi, the promoter of Gitanjali Gems.
"I don't see PNB recovering any amount in this case. May be the bank is in the position to recover only a marginal amount from Mr Nirav Modi. The government will have to invest substantial amount of capital in this government bank", research analyst Hemindra Hazari said in a conversation with NDTV. (Also read: PNB Fraud Case: Why Did RBI Refuse To Share Copies Of Investigation Reports)
The bank will have to captivate the jolts of these losses, first the massive fraud and then an erosion of capital. While diamond merchants Nirav Modi and Mehul Choksi have been escaping arrest, former MD and CEO of PNB Usha Ananthasubramanian has been named in two chargesheets along with top officials KV Brahmaji Rao and Sanjiv Sharan and Nehal Ahad. Not only this, the PNB board also divested its Rao and Sharan, of all executive and financial duties and powers
The bank has made a provision for the loss incurred as a result of the fraud. The lender said it provided for Rs 7,178 crore, 50 per cent of the total amount of Rs 14,356 crore in the fourth quarter of 2017-18. Now, PNB has been allowed to spread the fraud-related provisions over four quarters by the central bank. The bank would make the remaining Rs 7,178 crore of provisions due to the fraud in the three quarters that began on April 1.
"The capital of PNB is going to get eroded. Credit has to grow in the country and if the second largest government bank cannot grow, it will have larger ramifications for the Indian economy," Hemindra Hazari further told NDTV.
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