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Exclusive: Punjab National Bank likely to shut down Hong Kong branch amid rising NPAs in big borrowers' accounts

New Delhi: Scam-hit Punjab National Bank (PNB) is likely to shut down its Kowloon branch in Hong Kong in the next few days. According to sources, the state-owned bank, which was defrauded by diamantaire Nirav Modi and Mehul Choksi to the tune of over Rs. 14,000 crore, is reviewing the performance of its overseas banking operation amidst reports of growing non-performing assets (NPAs) in trade finance accounts at London, Hong Kong and Dubai. PNB has a presence in Hong Kong through two branches at Central Hong Kong, which is also the main branch and another one at Kowloon in northern Hong Kong.

“Kowloon branch is likely to bring down the shutter on 17 August. The branch mainly caters to trade finance and also offers various banking facilities to meet the requirements. The rising NPAs in the accounts of big borrowers at the branch is the primary trigger for the top management to move a proposal in favour of closing the branch,” sources said.

Queries sent to PNB Managing Director Sunil Mehta remained unanswered. Sources, however, confirmed that out of 13 major accounts dealing with trade finance at Kowloon branch, at least 9 accounts are NPA. Even the main branch at Des Voeux Road, Central, Hong Kong is running losses with massive NPA accounts, sources claimed. It is also learnt that PNB in 2017 had filed a complaint with Hong Kong police against a business house with Indian links for allegedly defrauding the bank.

 Exclusive: Punjab National Bank likely to shut down Hong Kong branch amid rising NPAs in big borrowers accounts

Representational image. Reuters.

“There are around 21 PNB employees at the two branches including half a dozen NRI’s and foreigners. Some officers from the Kowloon branch may be recalled while few others could be shifted to the main branch. Performance review of the main branch is also being carried out,” sources further added.

The banking operation of PNB started in Hong Kong in December 2007 following authorisation by Hong Kong Monetary Authority (HKMA). About a year before biggest banking fraud tumbled out, few officials based in Hong Kong had complained PNB head office in Delhi on irregularities in sanctioning loans. There were also allegations against rigging in treasury system to manipulate and a recommendation was made to install CCTV cameras, which was opposed tooth and nail by some PNB officials posted at the special administrative region of China.

The bank in its annual report had observed that a fraud was detected at its Brady House, Mumbai branch involving certain accounts under Gems & Jewellery Sector where through apparent connivance between these entities and few employees of the Bank, some Letters of Undertaking (LOUs)/Foreign Letter of Credit (FLCs) were issued fraudulently and in unauthorised manner to certain overseas branches of Indian banks through the misuse of SWIFT system of the bank which was then not integrated with Core Banking Solution (CBS).

The bank also said that after including outstanding amounts under other credit facilities, the total amount swindled by Modi and Choksi would be approximately Rs.14,356 Crores. Following massive banking fraud, PNB banking systems and controls have been further strengthened and SWIFT that was allegedly compromised was integrated with CBS. Now, all outward payment SWIFT messages are automatically generated through CBS without any manual intervention.

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Updated Date: Aug 09, 2018 08:34:19 IST

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