US$1.8 billion fraud may spread from one of India’s biggest banks

February 14, 2018 | By | Reply More

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Punjab National Bank detected fraudulent and unauthorised transactions in a branch in Mumbai ‘for the benefit of a few select account holders’.

Punjab-National-BankNEW DELHI: India’s second-biggest state-run bank said it has detected a US$1.8 billion fraud at a single branch in the nation’s financial hub, the impact of which could extend to other lenders as well.

Punjab National Bank has detected some fraudulent and unauthorised transactions in one of its branches in Mumbai “for the benefit of a few select account holders with their apparent connivance,” it said in an exchange filing on Wednesday.

“Based on these transactions other banks appear to have advanced money to these customers abroad.”

Investigative agencies have been informed, PNB said. The bank didn’t elaborate on what impact the fraud may have on its finances and it didn’t name the other lenders which could be hurt. PNB shares fell the most in a week on the news.

“So far there is no clarity on impact on the lender’s bottom line from this,” said Asutosh Kumar Mishra, a Mumbai-based banking analyst at Reliance Securities Ltd.

“There is no clarity on whether these transactions are reversed, whether the bank is holding collateral that could back part of these transactions or whether enforcement authorities will be able to recover this amount.”

The fraudulent transactions are the equivalent of eight times the lender’s 2017 net income of about 13.2 billion rupees (US$206 million), exchange filings show. PNB shares were trading 4.1% lower at 155 rupees as of 9.49am in Mumbai, the steepest intraday drop since Feb 6.

It’s also unclear if the fraud is linked to another case PNB had reported earlier this month, where a jeweller allegedly acquired fraudulent letters of undertaking worth 2.8 billion rupees from PNB in order to obtain loans.

At the time PNB had said it’s digging into records to see if the hit is much deeper.


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