RBI to Check Loans Sanctioned by PNB

The Reserve Bank of India (RBI) has directed the Punjab National Bank (PNB) to furnish the details of loan accounts sanctioned between April 1, 2005, and March 31, 2007.

In a letter dated September 25, 2007, and addressed to the bank’s credit administration department, the RBI has asked PNB to submit at the earliest names of the parties to whom loans and advances were sanctioned in a consortium with Oriental Bank of Commerce (OBC) and Indian Overseas Bank (IOB) as well as the loan accounts that were taken over from both OBC and IOB in the same period.

RBI has also asked for data about the advances sanctioned by the bank to the realty sector. According to the media reports, the Central Vigilance Commission (CVC) was conducting inquiries on receiving complaints. The asset quality of PNB has deteriorated, with 3.81 per cent of its advances becoming bad loans or NPAs in the quarter ended June 30, 2007.

For the quarter, the bank had reported fresh NPAs of Rs 600 crore. This is over and above the Rs 2,000-crore slippage the bank had in the last financial year. PNB had made Rs 137.87 crore provisions for NPAs in the first quarter.

The RBI officials said PNB had come under the scanner after it sanctioned a loan of Rs 350 crore to Vishal Overseas and Exports in 2006 for exporting diamonds, which is a sharp jump from a mere Rs 27 crore in the previous year.

This is despite the fact that the company’s profits had declined by 99.29 per cent (in the quarter ended December 2006) to Rs 10.07 lakh from Rs 15.91 crore during the corresponding quarter in the previous year. Net sales had also dipped by 83 per cent to Rs 143.8 crore in the same period. The loan was granted by a consortium of banks led by PNB.

PNB has, in the past few months, sold over 4 per cent of its holding in Vishal Overseas, according to the data available on the Bombay Stock Exchange website.