Punjab National Bank Ltd. told the exchanges it has detected a fraud of over Rs 3,800 crore by Bhushan Power & Steel Ltd. and has reported it to the Reserve Bank of India.
The state-run bank said in a filing the steelmaker misappropriated bank funds and manipulated its books of accounts to raise funds from consortium lender banks.
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The disclosure comes even as the lender is recovering from a major financial embezzlement of around $2 billion by diamantaire Nirav Modi in February 2018. Modi—who is currently fighting extradition to India—allegedly acquired fraudulent letters of undertaking from one of the bank's branches for overseas credit from other Indian lenders.
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“On the basis of forensic audit investigation findings and the Central Bureau of Investigation filing a First Investigation Report, on suo moto basis, against the company and its directors, alleging diversion of funds from banking system, a fraud of Rs 3,805.15 crore is being reported by bank to RBI,” the filing said. “At present, the case is at National Company Law Tribunal which is in advanced stage and the bank expects good recovery in the account.”
The bank said it has already made provisions amounting to Rs 1,932.47 crore, as per prescribed prudential norms, for the Bhushan Power & Steel account.
PNB said its domestic exposure to Bhushan Power & Steel Ltd. stood at Rs 3,191.51 crore and overseas exposure of $49.71 million (approx Rs 345.74 crore) at Dubai branch and $38.51 million (approx. Rs.267.90 crore) at its Hong Kong branch.
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