Two days after the Punjab National Bank informed stock exchanges that it was hit by a $1.77 billion scam, the lender had a teleconference with analysts as its stock was hammered. However, 20-25 minutes into the call, it ended abruptly (only the music could be heard), which surprised everyone who was listening in. While what transpired the call to end in such a way is not known, analysts in the call overheard PNB Managing Director and CEO Sunil Mehta annoyed and making his displeasure clear to the bank’s stuff on how media logged into the call as he saw TV channels flashing his comments.
In early May 2017, Mr. Mehta was all set to return to his home bank, Allahabad Bank, as MD and CEO. He started his career as an agriculture field officer in 1982 and became a general manager before joining Corporation Bank in January 2016 as executive director.
The buzz in the banking circles was that Mr. Mehta will head Allahabad Bank. However, the government has different plans. To everyone’s surprise, the government decided to appoint Mr. Mehta in PNB and asked then PNB MD and CEO Usha Ananthasubramanian to head Allahabad Bank, which is much smaller in size as compared to PNB which has now become the second largest lender of the country.
The PNB website described Mr. Mehta as “a seasoned banker with over 35 years of rich experience in various administrative and functional capacities at branches, zonal offices, and also at the head office level. He started his banking career as an Agriculture Field Officer at Allahabad Bank in 1982. He has held various important positions during the course of his career in view of his expertise in agriculture, retail, credit and planning & development.” Interestingly it does not mention his experience in treasury and foreign exchange operations, which is at the heart of this fraud.
For Mr. Mehta, the going was tough in PNB as the public sector bank was fighting surge in bad loans which was eroding profitability. The ₹ 11,500-crore scam could not have come at a worst time. The amount of the scam was 10 times higher than the first nine months profit of the current financial year of PNB, which was ₹ 1,134 crore.
Allahabad Bank was one of the lenders which was impacted due to the fraud at PNB and the Kolkata-based lender had informed the stock exchanges that “the bank is secured by LoU documents and fully confident to receive the payments.”