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PNB may lose Rs 170 million on bank defaults

State-run Punjab National Bank (PNB) said on Friday, it could lose Rs 170 million due to the financial problems at cooperative banks located in Ahmedabad and Gujarat.

"We have about Rs 100 million doubtful from Madhavpura Bank and Rs 70 million from Classic Cooperative Bank," S S Kohli, chairman of PNB, told a news conference.

Recently, both the banks issued cheques that bounced. This has aroused concern that these banks are experiencing financial problems caused by heavy lending to brokers who lost large sums of money in the recent stock market crash.

Madhavpura Mercantile Cooperative Bank and Classic Cooperative Bank, along with other cooperative banks located in Gujarat and elsewhere, have defaulted on cheques issued to other banks.

The benchmark 30-issue Bombay Stock Exchange index has lost nearly 18 per cent from its post-budget high of 4,386.98 points on March 1.

State-run Bank of India said on Thursday that it had lost nearly Rs 1.3 billion due to defaults by troubled cooperative banks.

The Reserve Bank of India has ordered around 2,050 urban cooperative banks to provide information about their capital market exposure.

When asked by reporters how PNB was hit by the payments crisis in the stock market, Kohli said, "We are affected, not hit. Our total exposure to the capital markets is only about Rs 380 million, which is far below 1 per cent of our total asset base."

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