Indian state lender PNB dives after $753m fraud uncovered

NEW DELHI • State lender Punjab National Bank (PNB) paced losses in the Nifty Bank Index yesterday after disclosing an incident of fraud totalling 38 billion rupees (S$753 million), a year after it suffered through the country's costliest banking scandal.

Shares of the New Delhi-based bank lost 11 per cent in Mumbai, making it the worst performer on the 12-member index, which was down 2.8 per cent. The 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, for which provisions of 19.3 billion rupees have already been made, PNB said in a filing on Saturday. The lender has reported the fraud to the Reserve Bank of India. It said Bhushan misappropriated funds and manipulated account books to raise money from consortium 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 before the National Company Law Tribunal.

The announcement is a fresh blow to PNB, which uncovered India's biggest 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 British police at the request of the Indian authorities and is embroiled in an extradition process. Modi denies wrongdoing.

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A version of this article appeared in the print edition of The Straits Times on July 09, 2019, with the headline 'Indian state lender PNB dives after $753m fraud uncovered'. Print Edition | Subscribe