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Punjab National Bank (PNB) is once again embroiled in controversy. A major fraud case involving ₹2,434 crore linked to two companies of the Kolkata-based Srei Group has come to light. The bank identified the fraud in a timely manner and informed the RBI and the stock exchange.
PNB Faces Rs 2,434 Crore Borrowing Scam
New Delhi: Punjab National Bank (PNB), one of the country's oldest and most trusted public sector banks, is in the news again due to a Rs 2,434 crore fraud. The bank informed the Reserve Bank of India (RBI) that two companies of the Kolkata-based SREI Group misused loans by flouting regulations.
According to PNB's report, the fraud occurred in two accounts Rs 1,241 crore in SREI Equipment Finance Limited and Rs 1,193 crore in SREI Infrastructure Finance Limited. It has been categorized as a borrowing fraud, meaning the money was misused after the loans were taken.
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The Srei Group was founded in 1989. The company financed machinery for construction projects. Over time, the debt burden increased, and in October 2021, the RBI had to intervene. The board was dissolved, and a resolution plan was approved through the National Asset Reconstruction Company (NARCL), but the investigation is still ongoing.
PNB has made 100% provisioning for its non-performing assets (NPAs). This means the bank has already set aside money to maintain its financial health. The bank's Provision Coverage Ratio (PCR) is approximately 97%, which indicates financial strength.
PNB's name also came up in the Nirav Modi and Mehul Choksi scam in 2018. At that time, a fraud of over ₹11,000 crore in trade finance came to light. The current case is different and involves corporate loan fraud, not trade finance.
Despite the news of the scam, PNB's share price saw only a marginal decline. However, the bank's shares have given investors a 144% return over the past three years.
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The bank identified the fraud in a timely manner and reported it to the RBI. To prevent similar incidents in the future, the bank has initiated a process to strengthen its internal controls and monitoring systems.
This Rs 2,434 crore fraud is a significant amount, but given the bank's strong financial position and timely reporting, account holders need not panic. PNB has learned from past mistakes and improved its security and monitoring systems.
