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PNB recovers record amount from defaulters due to Insolvency and Bankruptcy code

According to a Financial Express report, Punjab National Bank (PNB) recovered a record Rs 11,378 crore from defaulters in the first five months of this financial year, which is more than the state-run lender’s total recovery in the two years through 2017-18, according to the bank’s data.

The fraud-hit bank is trying to avoid featuring on the Reserve Bank of India’s watch-list after record losses last fiscal, mainly due to the Rs 14,357 crore fraud involving jewellers Nirav Modi and Mehul Choksi, PNB has stepped up efforts to recover money from the bank’s defaulters. It had made a recovery of Rs 5, 618 crores in the financial year 2017-18 and Rs 5,643 crore in the previous year.

The bank has set up a dedicated stressed asset vertical this financial year and has deployed as many as 3,000 employees to pursue recovery from various defaulters, on the other hand, its efforts were helped by the emergence of the Insolvency and the Bankruptcy Code (IBC), which was passed in 2016.

PNB was one of the biggest beneficiaries of the acquisition of debt-laden Bhushan Steel by Tata Steel through the new insolvency process, as it received Rs 3,081 crore. It recovered almost Rs 335 crores from Electrosteel and Rs 110 crore from Monnet Ispat through the IBC.

The finance ministry has already asked all the public sector lenders to improve their recoveries, along with implementing other reform measures and boost their business. At the same time, it has promised infusion of capital to strengthen their capital base and enable them to meet various regulatory requirements.

The record high recovery of loans comes at a time when Punjab National Bank is trying to leave the scandal behind, although the fraud has deteriorated its non-performing asset (NPA) ratios. As of June, Its net NPAs stood at 10.58%, against Bank of Baroda’s (BoB’s) 5.4% and Canara Bank’s 6.91%, two of the relatively more strong nationalised banks at present.

PNB has been able to beat its peers on certain other important parameters, For instance, at 42.6%, the share of its current account savings account (CASA) in total deposits as of June was better than BoB (40.8%) and Canara Bank (32.4%). A higher CASA-to-deposits ratio indicates more potential to generate profit, as the bank is getting money at lower costs due to relatively lower interest payout on such accounts.

PNB’s operating profit grew as much as 30.4% in the April-June period this year from a year before (despite a net loss), against BoB’s 13.5% and Canara Bank’s 18.6%. Its operating expenses, in fact, dropped 17.3% in the quarter ending June from the previous year, while Bank of Baroda’s rose 9.3% and Canara Bank’s rose 18.5%.

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