Published: Thu, February 15, 2018
Finance | By Loren Pratt

Rs 11k cr fraud detected by PNB Mumbai branch

Rs 11k cr fraud detected by PNB Mumbai branch

The bank had also intimated stock exchange BSE about the "fraudulent and unauthorised" transactions worth over United States dollars 1771.69 million in one of its branches in Mumbai.

Shares of Punjab National Bank today extended its fall for the second straight session, falling as much as 9 per cent in morning trade after the lender said it has detected a Dollars 1.77 billion fraud.

An official with the Central Bureau of Investigation (CBI) told Reuters on condition of anonymity that the cases were related. His flagship Firestar Diamond has said it had no involvement in the case. It did not name the banks or the customers.

Indian banks, including PNB, have been stung by a surge in bad loans in the past four years, choking lending growth vital to accelerate the pace of expansion in Asia's third-largest economy.

It recently announced a US$32-billion recapitalisation plan for state-owned banks to help them clean up their books.

PNB first notified the CBI of its discovery late last month and subsequently issued a "caution notice" to warn other lenders about the alleged fraud.


The secretary further said that the issue is an "isolated case of a single branch" and all possible action will be taken against the guilty persons.

The LoUs were issued on behalf of Diamond R US, Solar Exports, Stellar Diamonds. Other lenders give credit based on the letter of undertaking issued by a bank. "Based on these transactions other banks appear to have advanced money to these customers overseas".

India's broader NSE share index had risen 1 percent by early afternoon, tracking gains in Asian shares, after losing less than 0.4 percent on Wednesday.

Punjab National Bank (PNB) yesterday disclosed that it has detected some fraudulent transactions with financial implication of Dollars 1.77 billion (about Rs 11,346 crore) and the matter has been referred to law enforcement agencies for the recovery. None of the banks responded to requests for comment.

"We await more details, but if the "other banks" have advanced money to overseas suppliers against PNB's letter of credit, PNB would have to honour the payments, in our view, and would have to seek to recover the money from these overseas suppliers", said Morgan Stanley analyst Sumeet Kariwala, in a note to clients on Thursday.

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