A pedestrian walks past a Punjab National Bank (PNB) branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

PNB Says Not In Danger Of Breaching Capital Adequacy Norm

India’s second largest public sector lender today informed investors that even if the bank has to repay the total sum loaned out to designer and jeweller Nirav Modi, it won't fall below necessary capital thresholds.

So PNB has estimated the contingent liability on account of fraudulent transactions by Modi and related entities at Rs 11,300 crore. This is basis the data available via the bank’s SWIFT system.

“Even if entire amount is paid out we will not be breaching minimum regulatory capital,” said Sunil Mehta, managing director and chief executive officer of PNB in a conference call with investors and media.

The brief conference call revealed that the first default on a letter of understanding issued to the Nirav Modi group and Mehul Choksi group was on Jan. 25, for over Rs 281 crore.

The PNB-issued LoUs are part of the modus operandi using which at least three companies linked to Modi raised short-term buyer’s credit from international branches of a host of Indian banks. The exact liability on account of this scam is yet to be determined, said the PNB management.

Modi had offered to repay at least Rs 6,000 crore by selling assets, bank officials who didn’t want to be identified told BloombergQuint earlier. However in a subsequent interaction with the media Mehta had said no formal offer had been received from Modi.

Today he said the bank had not found any issues with other branches, and expects no further negative surprises. The matter is currently under RBI’s watch, he said.