Indian banks lose Rs 69,750 crore market cap after PNB reports Nirav Modi case
PNB shares have fallen 28% since the Nirav Modi case was reported, eroding nearly Rs10,976 crore of its market capbusiness Updated: Feb 20, 2018 17:30 IST
Listed Indian banks have lost nearly $11 billion (Rs 69,750 crore) in market capitalisation after the Rs 11,400 crore fraud at Punjab National Bank (PNB) came to light. PSU banks continued to bleed on Monday, after more lenders reported exposure to the scam.
PNB reported last Wednesday companies linked to billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking (LoUs) from a branch in Mumbai to secure overseas credit from other Indian lenders.
UCO Bank on Saturday said it has an exposure of $411.82 million to PNB’s Nirav Modi LoUs. Earlier, State Bank of India and Allahabad Bank disclosed exposure of Rs 1,360 crore and Rs 2,000 crore to loans taken using the LoUs, respectively.
“We believe such instances of fraud and further pressure on asset quality will be an overhang on valuations for PSU banks,” Edelweiss Securities Ltd said in a 15 February note.
Analysts believe the fraud will lead to higher provisioning and may further impact the profitability of banks, which are already struggling under mounting non-performing assets (NPAs).
“The amount involved is substantial (cumulative gross exposure relating to fraudulent transactions is $1.8 billion), but more worrying is the stark process lax and repeated instances of similar frauds (Winsome Diamond, etc). PSU banks continue to grapple with weak systems, raising questions on why the processes are not centralised, unlike most private banks where bypassing CBS is not easy,” Edelweiss report added.
PNB shares have fallen 28% since the Nirav Modi case was reported, eroding nearly Rs 10,976 crore of its market cap. State Bank of India has lost around Rs 18,000 crore in market value while Bank of Baroda has shed Rs 5634 crore.
Among private banks, Axis Bank, Yes Bank and ICICI Bank have lost nearly Rs 5,630 crore, Rs 4,820 crore and Rs 4,006 crore, respectively. The PSU Bank index slumped nearly 10.4%, while BSE benchmark Sensex index fell 1.5% in this period.
The Enforcement Directorate has seized gold, diamonds and precious stones worth around Rs 5,100 crore from 17 premises of Nirav Modi and Gitanjali Gems and also written to the ministry of external affairs to revoke the passports of all named in the case.
The Central Bureau of Investigation had already issued a lookout notice for Modi, his wife, brother and his uncle, Mehul Choksi of Gitanjali Gems.