INSUBCONTINENT EXCLUSIVE:
other reason why India should allow Punjab National Bank to advance even one rupee to anybody except the government
The financial institution, at the epicenter of a massive fraud allegedly committed by uncle-nephew jeweler duo Mehul Choksi and Nirav Modi,
morning suggests investors expect worse to come.
Punjab National has so far made a provision for only half the hit it has taken in the
so-called letter-of-undertaking scam
required under Basel III norms
For one, the hemorrhaging will continue as the Reserve Bank of India forces all lenders to flush out dud loans
Punjab National did raise $750 million from institutional investors in December, but that was before the fact it had been merrily handing
out promises to pay other lenders on behalf of the uncle-nephew duo came to light.
The pair have since left India
As for the broken bank they left behind, all that remains is for the RBI to take it under Prompt Corrective Action
Allahabad Bank has also been saddled with restrictions on advances
Tier 1 bail-in bonds the bank has issued
Forcing Punjab National to lend only to the government until it gets better may be part of the solution
Granted, it already has $11.5 billion of government bonds in its available-for-sale portfolio, and in an environment of rising interest
deposit franchise in current and savings accounts is intact
So Punjab National should look to expand its $30 billion investment book, the bulk of which comprises government bonds, while it waits for
It should take a rest.
(This column does not necessarily reflect the opinion of economictimes.com, Bloomberg LP and its owners)
