Sanjeev Kumar Dear All PNBiians This mail on issues related to PNB-Kazakhstan and PNB as whole was brought to the notice of both associations but they both miserably failed to understand whether this was an issue affecting an individual or our bank. The forum is being opened to all of you to form your own judgement. I exposed myself and was singled out by high flier bosses who think they own this bank but have least stake if this institution of ours is brought to perish. My destiny is not their handy work, i will shape my own. I bring to your notice how parent bank PNB is responsible for complete failure of processes and control setup in establishing a regulated ownership in its subsidiary. PNB owns 84% share in PNB-Kaz. PNB has invested around Rs. 400 Cr. in subsidiary (10.5 billion Tenge, INR 1 = App. 2.75 KZT) which was originally planned to be around 64%. Due to reluctance in introducing additional capital by local promoters the stake had to be raised by PNB. Local promoters who have better knowledge of business environment played safe and avoided introducing additional capital in bank. There are more than 100 local employees for just 4 branches and total business of around Rs. 90 Cr, less than a large branch business back home. The subsidiary was created by taking over a 20 year old bank which had piled up losses and re-structured bad debts to promoters’ related party on books. Legacy of bad management and staff were carried forward in new joint entity. The staffs continuing with new entity found manipulating easy by controlling all major departments and functions. The profit per employee though is negative the parent bank did not find it appropriate to implement its own strategy and business plan. Parent bank first failed to cease the initiative now it is slowly losing control over operations. There is no vision or plan to turn around this subsidiary. This is one investment by PNB out of which it cannot come out easily and even there is no willingness. All tolerance limits have been ignored for this investment and there is no cut loss strategy here. Instead the parent bank will have to add to capital in coming days to maintain threshold limit which is dented by piled up losses. In absence of such strategy I fail to understand how much loss would be sufficient to take any bold decision? By just not admitting a bad decision the plan is to sail through time and let next decision maker take a call. I had brought up these issues an year back to PNB management as in charge of biggest branch when I came head on with these issues and faced wrath of local regulator every day. The management at PNB-Kaz failed to take the ownership of wrong decisions and passed the bucks on branch people. The innocent new recruits who were more loyal to PNB had been singled out and fired by people belonging to old management. There is a group of senior officials who are loyal to old management and have not shown any reluctance in flaunting instructions of parent bank and management. Our people have been playing in their hands on the pretext of hostile environment and safety argument. The truth is that the money is flowing into their hands ( including members of BODs) by just passage of time even if interest of institution takes a hit. The course correction in PNB-Kaz will require very extreme decisions and strong will. The wrong decisions were as follows: 1. Loan given to a partnership firm • Amount – approx. Rs. 40 Cr. • Sanction: Board of Directors of PNB-Kaz (BOD comprised of two GMs of PNB, one ex-GM of other PSB as independent director and 2 local director • Loan sanctioned in Jan 2012 became bad in April 2012. One out of two partners convicted for fraud and jailed. • Currently bank is trying to salvage its right over property by selling an overvalued open market place. The bank may never recover its dues completely even manages to sell it. • Who may be held accountable for the case of quick mortality in here and why appraisal went so horribly wrong so soon? • This loan comprises almost 10% of our capital. 2. Loan given to an individual to buy a market place • Amount approx. Rs. 4.5 Cr. • Sanction: BOD (As above but ED of PNB replacing one GM) • Loan disbursed in July 2012 only interest was served for first three months and borrower defaulted afterwards. Cash flows from rents insufficient for repayment of loan. No tripartite agreement on record. Bank left with only option to enforce its security rights if at all manage to find a willing buyer. • Who may be held accountable for the case of quick mortality in here and why appraisal went so horribly wrong so soon? 3. Loan given to one Hotel Management company for construction of hotel • Amount: Our exposure approx. 5 million USD ( Rs. 27 Cr.) in consortium. Other consortium partner has full control over cash flows of all other businesses of group. Our primary security is half constructed hotel. • Sanction: BOD (As above but ED of PNB replacing one GM) • Loan is being disbused (Rs. 9.5 Cr. already disbused). Promoter is interested in withdrawing 4 million USD routed through related company and shown as debt. Debt having been subordinated to banks’ loan can not be re-paid during the tenor of the loan. Other consortium partner agree to repay debt from the disbursement of the loan. • Promoters foresee problem in completing this project and have not taken franchisee as originally planned. They are interested in withdrawing their stake and leave half completed hotel for the PNB-Kaz. Other bank having control over cash flows of other business is at advantage in such situation. • Loan without being completely disbursed is at a point of becoming bad. Why the wrong intentions of promoters and no ready markets for such hotels could be foreseen. 4. There are many smaller loans also which will be difficult to mention here. The bank has Rs. 43.63 Cr. accumulated loss on its books. There is no concrete plan to turn it around. Members of BOD are happy touring there every quarter along with their monthly emoluments as directors. PNB and IBD are happy appeasing senior officials and local belligerent employees. I was unacceptable to all of them; reasons are not very difficult to guess. People directing these events recommended my recall back to India. I had only requested our management to review our loaning policy and seriously look into local staff members recommending such loans. I have information of money being taken by insiders. This charge can not be proved but our prerogative would have saved us from further losses. I was flushed out of this rotten system so that most of them remain happy. The Vigilance system has taken a back seat in order to appease whom? And what our independent/govt. nominated directors have been happily doing? My question still remains that why and for how long admission of a wrong decision may be awaited. PNB as institution will bleed till the time people responsible have safe exit with unblemished track record. Shall we remain witness for years? Belligerent and Manipulative people shall rule the system until when? We all wish to see an healthy and competitive environment for our growth in our institution. In my demise i wish to see a light of hope for all of us and faith restored in truth.
Posted on: Sun, 21 Jul 2013 16:10:00 +0000
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