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PNB fraud: Allahabad Bank board divests CEO of functional powers

Namrata Acharya/Kolkata 15 May 18 | 10:56 PM

A day after the government initiated removal of Allahabad Bank Chief Executive Officer (CEO) Usha Ananthasubramanian following a CBI chargesheet in the Nirav Modi scam, the bank’s board on Tuesday divested her of all her functional responsibilities. It also requested the government to make suitable arrangements for the smooth running of the bank.


On Monday, after similar government action against two executive directors of Punjab National Bank (PNB), K V Brahmaji Rao and Sanjiv Sharan, the PNB board, too, divested them of their financial and executive powers.

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“The board of directors has decided that Usha Ananthasubramanian, managing director (MD) and CEO be divested of all functional responsibilities with immediate effect and the ministry of finance, department of financial services, be requested to make suitable arrangements for the bank,’ Allahabad Bank said in a regulatory filing to exchanges on Tuesday.


S Harisankar and N K Sahoo, executive directors of Allahabad Bank could not be reached for comments.


On Monday, the Reserve Bank of India (RBI) barred Allahabad Bank from high-risk lending and raising high-cost deposits. The RBI advised the bank to restrict expansion of risk-weighted assets and reduce exposure to un-rated and high-risk advances. The bank has been under prompt corrective action (PCA) by the RBI since January this year. The RBI has also restricted the bank from creation of non-banking assets and has advised it to restrict accessing or renewing wholesale or costly deposits or certificates of deposits. 


Allahabad Bank had posted a net loss of Rs 35 billion for the quarter ended March 31, 2018, against a net profit of Rs 1.1 billion in the fourth quarter of the previous financial year. For the whole year, the bank reported a net loss of about Rs 47 billion. In absolute terms, the gross non-performing assets (NPA) of the bank in the March quarter stood at Rs 266 billion, against Rs 207 billion in the same period last year.


Meanwhile, the CBI in a press release on Tuesday said, “Investigation revealed that during the period from 2011 to 2017, the accused officials of PNB, in conspiracy with said owners of the firms and others, had fraudulently issued a large number of letters of undertaking (LoUs) to overseas banks for obtaining buyer's credit in favour of said three firms without any sanctioned limit or cash margin and without making entries in the CBS system of the bank."

"The investigation further revealed that the fraud was allegedly perpetrated despite the circulars issued by the RBI, which was in the knowledge of senior officials of PNB. Further, the PNB officials did not implement the circulars and caution notices issued by the Reserve Bank of India regarding safeguarding the Society for Worldwide Interbank Financial Telecommunication (SWIFT) operations and instead misrepresented the factual situation to the RBI," the statement added.


Ananthasubramanian was MD and CEO of PNB between 2015 and 2017, before moving to Allahabad Bank.


Shares of Allahabad Bank closed at Rs 40.40 per share on the BSE, a fall of 8.60 per cent from the previous day’s close.


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