PNB stock drops by 10 pc after detecting fraud by Bhushan Power & Steel worth Rs 3,805 crore

Shares of government-owned Punjab National Bank (PNB) fell over 10 per cent on Monday after it reported a borrowing fraud of Rs 3,805 crore in Bhushan Power and Steel Limited's (BPSL's) account.

At 1:30 pm, the stock was trading 10.34 per cent down to Rs 73.30 per share on the BSE.

The fraud, alleging diversion of funds from the banking system, is being reported to the Reserve Bank of India (RBI) on the basis of the findings of a forensic audit, the PNB said in a statement.

"In the accounts of the company (BPSL), the bank has already made provisions amounting to Rs 1,932.47 crore as per prescribed prudential norms," it said.

"It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at National Company Law Tribunal (NCLT) which is in advance stage and the bank expects good recovery in the account."

PNB has been defrauded of over Rs 14,000 crore in a scam by business tycoon Nirav Modi that came to light last year. Modi allegedly acquired fraudulent letters of undertaking from one PNB's branches for overseas credit from other Indian lenders.

Bhushan Power and Steel, one of India's most indebted companies, was among the first 12 companies referred by the RBI to a bankruptcy court for a debt resolution process under the new insolvency law.

The PNB statement added: "Reporting of borrowal fraud of Rs 3,805.15 crore in NPA account of Bhushan Power and Steel Ltd (BPSL) -- including domestic exposure of Rs 3191.51 crore at large corporate branch at Chandigarh, Zonal Office, Chandigarh, overseas exposure of USD 49.71 mio (approx Rs 345.74 crore) at Dubai branch and USD 38.51 mio (approx Rs 267.90 crore) at Hong Kong."

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