Fraud-Hit Indian Bank Eyes Image Makeover, Expects Profits

(Bloomberg) -- Punjab National Bank, the Indian lender that’s complained of three scandals in as many years, is clearing a backlog of provisions and expects to post net income in every quarter of the financial year started April 1.

Operating profits are already looking healthy, Managing Director S.S. Mallikarjuna Rao said in an interview in New Delhi on Saturday. The nation’s second-largest public sector bank is also looking to cement more prudential measures -- such as separating processes responsible for loan approvals from those that take care of disbursals -- to avoid potential fraud. The two departments would function at an arms’ length from each other and report into a new risk-management team that oversees all loans in a specified geographic area.

Punjab National Bank in 2018 alleged it was swindled of $2 billion by a jeweler who colluded with bank officials and borrowed money without adequate collateral by exploiting lapses in the loan approval and disbursal process. It reported two more incidents stemming from improper loans last year. Its shares have fallen almost 45% in 2020 compared with a 15% drop in the benchmark index.

Read more: Fraud-Hit Bank in India Alleges It Has Been Swindled Again

“Opportunity for that kind of fraud will not arise now, we have operationally closed it,” Rao said, referring to the move to separate the loan departments. “I am expecting that in one or two years our price should do better, and perception of PNB in the market would be much better.”

The bank, which absorbed Oriental Bank of Commerce and United Bank of India last year, is also changing its strategy to focus on loan accounts worth about 1.5 billion rupees and reduce dependency on corporate debt above 2.5 billion rupees.

Punjab National Bank had a capital adequacy ratio of 14.14% at the end of March and will estimate fresh requirements only after finalizing the opening balance sheet of the amalgamated entity in July, Rao said.

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