VUCA??

1
V It is fundamentally U It fundamentally
related and associated
VOLATILITY
means a lack of

UNCERTAINTY
with the speed of

“
advancement in the predictability in
business, market and issues and events.
so on.

C Complexity refers to the

number of variables and A Ambiguity refers to a
lack of clarity about
factors we have to
COMPLEXITY

AMBIGUITY
consider, their variety, how to interpret
and the connections and something.
relationships between
them. 2
 As opposed to

V Volatile Stable The meaning and

significance of
U Uncertain Predictable,
VUCA is much
Certain clearer if we
C Complex Simple, Linear balance it with its
contrary opposites
A Ambiguous Clear

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 What is irregular about the fraud?
How PNB was defrauded of ₹ 11,400 Crores? Jewellery Sector under stress?

How was the LoU misused? Why did PNB give an LoU without any collateral?

Taxpayers taxed again?? How did the fraud come into the light? How much is the loss?
What other banks were affected?
Who is Nirav Modi? Bail – In Provision weakened?
Who assumes the Liability?
Risk Management
PNB Ratings downgraded!!
position vacant?
Impacts on Stock Markets?
LIC – The biggest loser!!
Confidence on investor hit!
What action has PNB taken?

A Case Study of PNB Scam 4

￮ The principal objective of the study is to
analyze the occurrence of the Punjab OBJECTIVE
National Bank Scam in the VUCA world
and to study the impact of this scam on OF THE
different sectors.
STUDY

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 This study uses secondary data.
 Newspaper journals, RBI circulars related to the
scam were reviewed. RESEARCH
Bank stock market data were taken from Sensex.
METHODOLOGY


 The Methodology used in the study is 5W2H

Approach.
 5W2H stands for 5Ws and 2Hs or Who, What,
When, Where, Why, How and How much.

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 5W2H OF THE PNB SCAM
WHAT? WHO? WHEN?

• What happened? • Who are the culprits involved? • When did the fraud come into
• What is the fraud about? • Who reported the fraud? the light?
• What is irregular about this • Who assumes the liability? • When did the scam start and
fraud? • Who are the stakeholders stop?
• What action has PNB taken? involved?
• What other banks were
affected? Where? Why?
• What is the extent of the fraud?
• What are the authorities doing? • Where did the scam happen? • Why did PNB give an LoU
• What all other companies were guarantee without any
involved in the scam? collateral?
• Why is it a problem?
How? How much?

• How was the LoU misused? • How much is the loss?

• How did the PNB fraud come into the light? • How much was the fraud in numbers?
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₹ 1,14,00,00,00,000
That’s a big number!
What actually happened?

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 What is the Ideal Situation?
India Overseas
CBS
Bank A SWIFT Bank B
Issuer Overseas Branch
Receiving Bank
Limit/Collateral
/Credit Margin

LoC/LoU
Credit

Payment
Indian Company X Foreign Company Y
Goods/Services

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 What actually happened?
India Overseas
CBS
Bank A SWIFT Bank B
PNB Overseas Branch
Collateral/Cash

Allahabad Bank:₹2000-₹2200 crores

Union Bank: ₹2000-₹2300 crores.
Margin

Axis Bank: ₹2,000 Crores.

LoC/LoU State Bank of India: ₹960 crores

Payment
Indian Company X Foreign Company Y
Goods/Services
Diamond R US, Solar Exports &
Stellar Diamonds
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FRAUD IN NUMBERS…!!

₹ 1,14,00,00,00,000

The fraud is 8 times the bank’s 2016 –

2017 profit of is ₹ 1,325 crores.

It is equal to a PNB share third of

PNB’s net worth (₹ 35,300 crores).

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Repercussions of the Scam…

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1. Impact on Stock Market.

Table 1: Impact on Banks on account of PNB Scam

Erosion in Market Gross NPA
S. No Bank Name Percentage Loss
Capitalization (Q3 FY18)

1. Union Bank of India -5.8% ₹ 6,33 crores 13.03%

2. Allahabad Bank -9.9% ₹ 4,84 crores 14.38%

3. Axis Bank -3.4% ₹ 4,800 crores 5.3%

4. State Bank of India -3.34% ₹ 8,329 crores 10.35%

Source: Times Now
Period: Between 12th February 2018 – 15th February 2018
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1. Impact on Stock Market.
Table 2: Impact on Jewelry Sector on account of PNB Scam
Percentage Loss
S. No Institution Name
in Shares

1. Gitanjali Gems 18%

2. PC Jewelers 19.5%

3. Tribhovandas Bhimji Zaveri 4.32%

4. Thangamayil Jewelry 2%

5. Rajesh Exports 1.34%

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1. Impact on Stock Market.
Table 3: Loss of LIC on account of PNB Scam

LIC Shareholdings Fall in Share Price The Loss in Value

S. No Institution Name
(%) (%) of Holding

1. Union Bank of India 13.93% 22.27% ₹ 1,216 crores

2. Allahabad Bank 13.24% 7.22% ₹ 1,04 crores

3. Axis Bank 13.17% 10.25% ₹ 65.8 crores

4. Gitanjali Gems 2.88% 40.25% ₹ 11.9 crores

Source: The Indian Express

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2. The confidence of the investor.

3. Taxpayers taxed again?

4. The weakening of Bail – in Provision.

5. Loopholes in the system.

6. Sector under stress.

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PNB Ratings by Credit Ratings Agencies

Credit Rating Agencies Rating Before Scam Rating After Scam

Moody’s Investors Service Baa3/P-3 Ba1/NP

Fitch Ratings bb bb-

CRISIL CRISIL AAA/CRISIL AA CRISIL AA+/CRISIL AA-

India Ratings IND AAA IND A++

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Recommendations:

INDEPENDENT
01 DUE 03 SPECIALIZED 05
DILIGENCE CADRE
FIX THE AUTONOMY RISK
BANKING 02 TO THE 04 MANAGEMENT
SECTOR BANKING OFFICER
SECTOR

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Thank you

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