India’s fourth largest bank has reported another big-ticket scam.
On July 6, Punjab National Bank (PNB) said in a stock exchange filing that one of its debtors, Bhushan Power & Steel, has defrauded the bank of Rs3805.15 crore ($555 million).
“It has been observed that the company has misappropriated bank funds, and manipulated books of accounts to raise funds from consortium lender banks,” PNB said. The scam came to light during a forensic audit, after which India’s central bureau of investigation (CBI) filed a suo motu complaint against the company, the bank added. The audit was also conducted by the CBI, the Times of India newspaper reported.
Bhushan Power & Steel has been a defaulter for long. In June 2017, it was one of the first high-profile companies that India’s central bank referred to the bankruptcy court after its loans turned into non-performing assets.
This is the second scam of great magnitude that PNB has reported in recent times.
In January 2018, the bank informed the CBI that diamond merchants Nirav Modi and Mehul Choksi had defrauded it of, what was later ascertained as, Rs14,357 crore. That the fraud had ballooned to such an amount before the bank took notice had led to public outrage and allegations of high-level corruption.
PNB posted a loss of Rs13,416.91 crore in the quarter ended March 2018, but returned from the red in the December 2018 quarter.
“This rebound shows that the fundamentals of the bank are strong. We have now provided entire 100% for the incident (Nirav Modi scam) that shook us in February last year,” the bank’s CEO and managing director Sunil Mehta had said then. “If one were to remove the Rs7,200 crore we had provided for this incident, we would have in fact reported a net profit of about Rs2,000 crore for the nine months (ended December 2018).”
The bank has made provisions for Rs1932.47 crore in the case of Bhushan Steel & Power, according to a stock exchange filing. The bank’s shares slumped over 7% today (July 8) in early trade.