PSU banks fall up to 4% after increase in PNB fraud amount, RBI discontinues use of LoUs

Public sector banks shares hit the most, with the PSU Bank index itself falling more than 2 percent after the increase in PNB fraud amount for the second time.

Punjab National Bank and Canara Bank were biggest losers among PSBs, shedding 4 percent each.

Bank of India, IDBI Bank, Allahabad Bank, OBC, Syndicate Bank, Union Bank of India, Andhra Bank, Bank of Baroda and SBI slipped 1-3 percent.

PSU Bank index lost 13 percent in last one month, especially after PNB detected biggest banking fraud while Nifty Bank index shed 3.6 percent and Nifty 50 was down 1.6 percent in same period.

Image11432018

Punjab National Bank (PNB) has told the police on Tuesday that it has uncovered additional exposure of about Rs 942.18 crore (USD 145.27 million) to Asmi Jewellery of Gitanjali Group in connection with a massive alleged fraud, according to a court filing by the Central Bureau of Investigation.

This takes the Delhi-based lender’s total exposure to one of country’s biggest banking frauds up to Rs 13,640 crore from the earlier estimate of Rs 12,700 crore.

As investigations widen and unauthorized loans are uncovered, the bank has said that the total amount allegedly defrauded by the accused (Gitanjali Group) till date is about Rs 7,080.86 crore during the period 2013-17, according to the CBI filing. The investigating agency has requested permission for further investigation under The Prevention of Corruption Act.

Previously, PNB had pegged its fraud exposure to Gitanjali Group, controlled by Mehul Choksi, at Rs 6,138.28 crore, after addition of Rs 1,251.56 crore on February 22.

Meanwhile, in a remedial action to the Nirav-Modi led Punjab National Bank fraud, now worth Rs 13,640 crore, the Reserve Bank of India (RBI) has discontinued use of LoUs or Letters of Undertaking and Letters of Comfort as trade credits.