$2 Billion Bank Fraud Is Barings Redux For Biggest Indian Lender - The Economic Times

2/28/2018 $2 billion bank fraud is Barings redux for biggest Indian lender - The Economic Times
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$2 billion bank fraud is Barings redux for biggest Indian

lender
BY BLOOMBERG | FEB 28, 2018, 01.04 PM IST Post a Comment
By Matthew Winkler and Anto Antony EXPAND

RELATED COMPANIES
The chief of India’s biggest bank called for an industry-wide review of risk controls in day-to- Punjab Na…
day operations, comparing a $2 billion fraud at one of his rivals to the 1995 Barings Plc
rogue trading debacle that ended the 233-year-old British merchant bank’s independence. PNB
Big Change:
“The Punjab National Bank fiasco is something similar to the fall of Barings Bank, where one The end of Five-Year Plans: All you need to know
trader and his misadventure brings down the whole bank,” Rajnish Kumar, chairman of State
Bank of India, said in an interview at his Mumbai office on Tuesday. “In this case also the system has completely failed at a particular office,
in a particular organization, causing huge losses.”
PNB has lost about a third of its market value and is facing rating downgrades since disclosing the scam two weeks ago, when it alleged that
a rogue employee provided fake guarantees worth $2 billion to a couple of jewelers, which they used to obtain loans from abroad. While the
extent of losses to PNB is yet unclear, the news has triggered a wave of fingerpointing and regulatory tightening across the industry that could
chill a nascent recovery in lending.
Shares of PNB sank the most since 2004 on Tuesday and hover near a 20-month low, pacing losses among state-run lenders, after
regulators asked all government-owned banks to review bad loans above 500 million rupees ($7.7 million) for fraud. The banks have 15 days
to identify and clean up weaknesses in the way they do business, the top bureaucrat overseeing the sector said on Twitter.
“In a way it seems to me as a one-off incident,” Kumar said of the PNB scam, adding that while there has been “some impact” on the rupee
the perception of India hasn’t changed much. “But at the same time it also is a pointer that there is need for relooking at the risk governance
architecture.”
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Kumar predicts that Asia’s third-largest economy will continue to grow strongly, demand for credit will increase and Indian bond yields will
“stabilize” after rising to a two-year high as the global recovery gains strength. Indian gross domestic product probably expanded 7 percent in
October to December, faster than 6.3 percent the previous quarter, according to the consensus estimate in a Bloomberg survey before data
due 5:30 p.m. in New Delhi on Wednesday.
‘Idiosyncratic’
Loan growth accelerated to about 11 percent this month before the PNB fraud came to light, almost double the average pace last year as the
government pledged to inject a record $32 billion into state-run banks. It had plunged to a 25-year low late in 2016 as lenders grapple with
the second-highest bad-loan ratio among big economies.
Fitch Ratings and Moody’s Investors Service have also placed PNB’s ratings on review for possible downgrade. While Moody’s says the
PNB fraud is “ idiosyncratic” and there’s nothing to prove that such illegal practices are widespread across India’s banking sector, analyst
Alka Anbarasu said in an email that PNB will need high provisioning to tide over the problem.
“Credit risk is a known devil which at worst you might underestimate,” Kumar said. “But if you don’t take care of your operational risks, it can
hit you very hard on the face when least expected.”
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2/28/2018 $2 billion bank fraud is Barings redux for biggest Indian lender - The Economic Times

Co-sponsored By: Associate Sponsors

01:53 PM | 28 FEB LIVE सेसेस िन ट 50 सोने

$2 billion bank fraud is Barings redux for biggest Indian

By Matthew Winkler and Anto Antony EXPAND

Recom m ended By Colom bia

Live Market Industry About Us

Dow nload it from Dow nload it from Dow nload it from

Other Times Group news sites Hot on the Web

In Case You Missed It

GST Rates Aadhaar Card

Bank FD Rates SBI Share Price

PNB to Nirav Modi Sensex

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