Road To Recovery

A year after it was hit by the biggest banking scandal in the country’s history, PNB chief Sunil Mehta is steering the bank towards financial stability. But the country’s third-largest state-owned lender isn’t completely out of the woods yet.

- T. Surendar

WHEN YOU THINK OF STATE-RUN banks, the image that leaps to your mind is that of stodgy behemoths where time almost stands still. For many Indians, Punjab National Bank (PNB) is also just another sarkari bank with file-pushing babus and mindless layers of bureaucracy. But what few know is that PNB is India’s first private bank that was created with nationalistic fervour in Lahore nearly 125 years ago. Its client list included several prominent Indians like Mahatma Gandhi, Jawaharlal Nehru, and Lal Bahadur Shastri, who chose to bank with it as the spirit of swadeshi surged during the independence struggle. And for years it was seen as a trusted people’s bank that helped many Partition refugees with their banking needs when they moved after Independence in 1947.

But last year, the storied lender suddenly lost its sheen when it was hit by the biggest banking scandal in the country’s history. India’s third-biggest state-owned lender stunned the financial world in February last year when it announced that it had uncovered fraudulent transactions worth 11,400 crore at one of its Mumbai branches. It wasn’t just the business world but millions of ordinary Indians too who were shaken by the revelation that two jewellery groups—associated with Mumbai-based jeweller Nirav Modi and his uncle Mehul Choksi—had raised crores of rupees in overseas credit by using fake bank guarantees issued by some bank employees.