PNB HONG KONG BRANCH UNDER SUPERVISION

Punjab National Bank

Punjab National Bank, Hong Kong office is now under compulsion to maintain HIGH QUALITY LIQUID ASSETS (HQLA) which is equivalent to 100 per cent of unpledged deposits.  The state owned bank which is in troubled waters has now been brought under further tight position to comply with the regulatory guidelines of Hong Kong Bank.

  1. Enhanced supervisory oversight and barred from soliciting customer deposits are the penalty imposed by Hong Kong Monetary Authority on PNB
  2. The capital adequacy ratio of the two lenders fell below the regulatory requirements. March 31, 2018 figure of Capital Adequacy ratio as per Basel III norms declined to 9.20 per cent for PNB as against 11.66 percent and further to 9.82 per cent on consolidated basis, at the end of March 2017 as filed by PNB.
  3. Indian Overseas Bank (IOB) capital ratio fell to 9.25 per cent by March 31, 2018, as against 10.50 per cent in the previous year. RBI says the buffer should read an upward figure of 11.5 percent.
  4. IOB and fraud-hit PNB in separate regulatory filings said in view of the capital position of the banks as on March 31, 2018, being below the regulatory requirement (including counter-cyclical buffer) of RBI, Hong Kong Monetary Authority (HKMA) is enhancing the supervisory arrangements on their Hong Kong branches.
  5. PNB’s Capital Adequacy has fallen short of the regulatory requirements due to unprecendented loss in the fourth quarter of 2017-18 and IOB is loaded with the task of huge bad loans to its kitty. Both banks add that transactional deposits like pledged deposits for commercial loans would be excluded from this supervisory arrangement.
  6. Furher, the Hong Kong branch of IOB is permitted to take deposits as margin for credit that is extended.
  7. Both banks should maintain a position of NET DUE to its head office, other branches and any diret or indirect subsidiaries and associates of the banks.
  8. Further it is stated that both banks are operating from funds borrowed frm India and hence KHMA regulatory requirement does not alter the bank’s position.

 

Notings:

  • Capital erosion in PNB is due to Rs. 14,000 crore fraud of Nirav Modi and Associated in issuance of fraudulent LoUs generated in PNB’s name.
  • This has resulted in the bank’s posting a great loss of Rs. 13,416.91 crore for Jan-March periods, which compelled the bank to make huge provisions for bad loans.
  • Also it is believed that PNB’s financial position would improve in the coming quarters and the first quarter itself is expected to bring Rs. 89000 crore recvovery. Also resolving of the case under NCLT is expected to bring more and money.
  • NPA of IOB was 25.28 per cent of Gross Advance at the end of March 2018 which was 22.39 during the previous year and its net NPAs were at 15.33 per cent at the end of the quarter which was 13.99 in the previous year for the same quarter.
  • This has also equally affected the share prices of both the banks.

 

Author: Admin Bankedge

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