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Hit by the Nirav Modi scam, Punjab National Bank (PNB) on Tuesday reported a net loss of ₹13,420 crore for the fourth quarter ended March 31, against a net profit of ₹262 crore in Q4 FY17 and ₹231 crore in Q3 FY18.
This is the highest quarterly loss reported by any bank in the country’s banking history, say industry observers.
For the full FY18, PNB reported a standalone net loss of ₹12,130 crore, against a net profit of ₹1,325 crore in FY17.
The latest quarter was weighed down by the part provision of ₹7,178.42 crore that the bank made for the Nirav Modi-perpetrated fraud.
The pain on this account is not yet over for the bank: the bank is making the remaining provision of ₹7,178.42 crore during the first three quarters of FY19 in keeping with the RBI’s directive.
Although the RBI allowed PNB to make provisions against the fraud at the rate of 25 per cent without debiting “other reserves” and provide the remaining amount during the first three quarters of the current fiscal, PNB has made a higher-than-required provision at the rate of 50 per cent, amounting to ₹7,178.42 crore, for Q4 FY18.
Higher provisioning
“We decided to go in for 50 per cent provisioning as we wanted to clean up the balance sheet to the maximum extent possible in 2017-18 itself,” said a PNB official.
PNB reported its first ever operating loss, at ₹447.38 crore, in Q4. The provision for bad loans stood at ₹16,200 crore. Total income came in at ₹12,946 crore, against ₹14,989 crore in the same quarter last year.
The bank’s gross NPA ratio increased to 18.38 per cent from 12.21 per cent sequentially. Net NPAs surged to 11.24 per cent from 7.55 per cent.
Interestingly, in their independent auditors’ report, the statutory auditors, without qualifying their opinion, have drawn attention to the notes to the accounts as regards the bank’s accounting treatment of provisions relating to the frauds involving “certain accounts in gems & jewellery sector”.
Part of the reason for the bank reporting an operating loss in the fourth quarter is the higher employee cost, for which it had charged ₹63.45 crore in Q4 FY18 and deferred ₹190 crore to the subsequent three quarters.
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