Punjab National Bank (PNB) said that its performance in Q2 will continue to be strong (as in Q1), as the public sector lender attempts to bounce back after being hit by the ₹14,000-crore Nirav Modi scam last year.

While the bank has raised the cash-recovery targets for the current fiscal in view of the possible resolution in NCLT accounts, it has also put in place a two-pronged mechanism to prevent future scams.

“We are yet to announce the audited results. On a broader level, Q2 was again a good quarter for us. Our retail recovery was on track like Q1. Our credit has grown by 13.8 per cent, much better than the industry. Domestic deposits also grew by about 10 per cent. The bank achieved the targets for priority sector lending,” said Sunil Mehta, Managing Director & CEO of PNB.

RWA declines

He said that despite the increase in gross credit, the bank’s risk-weighted assets (RWA) had declined, mainly due to the churning of its credit portfolio. “In the June quarter also, our RWA had gone down (year-on-year basis) to 55 per cent from 64.5 per cent. Q2 will still be better,” he said.

After achieving high recoveries in Q1 of this fiscal, the bank is hopeful of maintaining the same level in Q2; the bank is expecting to report recoveries of about ₹5,000 crore.

“We had planned for total recoveries of ₹17,500 crore and ₹4,500 crore of upgradations for the current fiscal. Now, we are targeting ₹20,000 crore of recoveries as we expect contribution from NCLT accounts. Thus, overall, the target is ₹22,000 crore, of which we have recovered about ₹13,000 crore in just two quarters alone,” he added.

Answering a question on learnings from the Nirav Modi scam and the IL&FS issue, Mehta pointed out two keys areas where the bank was strengthening its efforts to avoid frauds in the future.

To mitigate the people risk in forex operations, the bank has created a centralised back office for trade finance operations. So, all trade finance transactions processed at the branch level, will move to the centralised back office and then to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment centre.

“There is a three-layer checking system now,” he said.

Also, the bank has integrated the SWIFT system with the core banking solution (CBS).

Referring to the IL&FS episode, he said PNB was the least affected bank due to its low exposure, and pointed out that there was a need to strengthen internal rating systems at banks instead of just depending on external ones.

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