Login ID:
Partner Login
Contact Us : 7066511911

Indian Bank Alleges $1.77 Billion Scam at One of its Branches

14 Feb 2018 10:11 am
By Corinne Abrams and Debiprasad Nayak 

MUMBAI--India's second-largest state bank said it had uncovered an alleged scam involving some $1.77 billion in transactions at a Mumbai branch, sending shares plunging as investors waited to see whether its bottom line would be damaged.

"The bank has detected some fraudulent and unauthorized transactions (messages) in one of its branches in Mumbai," company secretary Balbir Singh said in an exchange filing on Wednesday.

Shares of the Punjab National Bank dropped 10.3% on the news.

The filing provided few details, but it said several customers had benefited and that other local and international banks had been involved. It was unclear what form the alleged fraudulent transactions had taken.

"Other banks appear to have advanced money to these customers abroad," the filing said.

PNB said it had referred the matter to law-enforcement agencies. A spokesman for India's Central Bureau of Investigation said that it was looking into complaints received from the bank.

The transactions represent one-third of the bank's market value of 360 billion rupees ($5.6 billion). They are also twice the amount India's government had planned on investing to prop up PNB against its already-heavy bad-loan burden.

The government last year announced a recapitalization plan for state-run banks, which are saddled with non-performing loans. PNB is slated to receive 54.7 billion rupees ($851 million) in the financial year ending March 31.

"If it's a fraud case, then they have to write it off. If it's a loan, then there might be some recovery," said an analyst at a Mumbai brokerage--who didn't want to be named due to the sensitivity of the case--said of PNB. If the bank ends up having to write off $1.77 billion, "the amount is significant."

Spokespeople for the Reserve Bank of India and the country's finance ministry declined to comment. A spokesman for the Securities and Exchange Board of India, which regulates local markets, didn't immediately respond to a request for comment.

Write to Corinne Abrams at corinne.abrams@wsj.com and Debiprasad Nayak at debi.nayak@wsj.com

(END) Dow Jones Newswires

February 14, 2018 05:11 ET (10:11 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
Top 5 Special Reports
USD/INR (Dec. 19) Bearish Short-term Trend: Retestin...
Weekly: ICE Raw Sugar Touches 13 Month High On Short C...
Weekly: ICE Cotton Ends up; Awaits US-China Trade Deal...
Weekly: Pulses Slips On Listless Demand In Dals, Liquid...
USD/INR (Dec. 19) Bearish Short-term Trend: Retestin...