India state lender's shares plunge after uncovering fresh $753 million fraud

The announcement is a fresh blow to state lender Punjab National Bank, which uncovered India's biggest-ever bank fraud last year.
The announcement is a fresh blow to state lender Punjab National Bank, which uncovered India's biggest-ever bank fraud last year.PHOTO: BLOOMBERG

NEW DELHI (BLOOMBERG) - State lender Punjab National Bank paced losses in the Nifty Bank Index on Monday (July 8) after it disclosed another incident of fraud amounting to 38 billion rupees (S$753.52 million), roughly one year after it suffered through the country's costliest banking scandal.

Shares of the New Delhi-based lender lost 11 per cent in Mumbai, making it the worst performer in the 12-member Nifty Bank Index, which was down 2.8 per cent. Monday's drop is the sharpest fall in PNB's shares in more than a year.

The new case relates to the non-performing assets of insolvent Indian firm Bhushan Power & Steel Ltd, for which provisions of 19.3 billion rupees have already been made, PNB said in a filing last Saturday.

The lender has reported the fraud to the Reserve Bank of India.

PNB said Bhushan misappropriated bank funds and manipulated account books to raise money from consortium lender banks.

A vast majority of the fraud took place at PNB's Chandigarh branch, and also involved offices in Hong Kong and Dubai.

The bank said it expects a "good recovery" from the insolvency case, which is currently before the National Company Law Tribunal.

The announcement is a fresh blow to PNB, which uncovered India's biggest-ever bank fraud last year.

That nearly US$2 billion (S$2.72 billion) scandal was allegedly perpetrated by jeweller-to-the-stars Nirav Modi, who was arrested by UK police at the request of Indian authorities and is embroiled in an extradition process.

Modi denies wrongdoing.