Punjab National Bank today said it has segregated its loan appraisal and monitoring system and created various verticals to reduce credit risk, in the aftermath of the Rs 14,000-crore Nirav Modi fraud.
PNB also said it is taking steps against erring employees, legal action against the fraud perpetrators and closely cooperating with the regulators and law enforcement agencies.
"Technology-based off site audit system for monitoring alerts in Core Banking System is in operation now,” the bank said in its Annual Report 2017-18 published today. “Loan appraisal and monitoring system have been segregated. Different verticals have been created for sourcing, initial due diligence, processing, monitoring and recovery of loans for reducing people risk, operational risk and credit risk.”
Going forward, it will continue its concerted efforts in addressing the asset quality concerns and strengthening its balance sheet to reinvigorate credit growth, the bank said.
PNB suffered a fraud of Rs 14,357 crore allegedly carried out by celebrity jewellery designer Nirav Modi and his associates in connivance with certain officials at its Brady House branch in Mumbai, wherein letters of undertakings and foreign letter of credits were issued fraudulently to some overseas branches.
PNB posted a historic loss of Rs 12,283 crore during the fiscal ended March 2018 due to higher provisioning for non-performing assets, mark-to-market losses in treasury portfolio and provisioning for fraud.
"Despite being a challenging year, your bank crossed the milestone of Rs 10 lakh crore in domestic business as on March 31, 2018. Looking ahead, the banking sector's key concern over high level of stressed assets is likely to be addressed under the new overarching framework of Insolvency and Bankruptcy Code," Chairman Sunil Mehta said in his address to shareholders.
PNB is well positioned to capitalise on new opportunities for profitable growth and value creation for all its stakeholders, he said.
"The audit and compliance infrastructure is being strengthened and risk processes have been re-engineered," he added.
Managing Director and Chief Executive Officer, also named Sunil Mehta, said the incident at Brady House branch was "an unfortunate, one-off" incident caused by few employees in a single branch.
"An isolated incident cannot undermine our relentless spirit and battle hardened confidence that makes us a leading bank. We are now even more determined and committed to improve performance," he said.
PNB said the bank is focussing on adjustments that are conducive to improving risk management, improved accountability and profitability.
PNB said the liabilities amounting to Rs 6,586.1 crore on account of LOUs and FLCs which became due on March 31, 2018 have been fully honoured and paid by the bank. It has further created liability of Rs 6,960 crore in its books as a prudent measure in respect of balance LOUs and FLC relating to this fraud which are due after March.
The slippages due to fraud in March 2018 were Rs 7,579 crore.