Punjab National Bank Hit With Rs 3689 Crore Fraud; DHFL Was Given This Loan

As per the reports, on Thursday, India’s second-largest state-run lender Punjab National Bank (PNB) reported a loan of Rs 3,688.58 crore granted to Dewan Housing Finance Limited (DHFL) as fraud to the Reserve Bank of India.

How Did This Happen?

Yes, you heard right, Punjab National Bank (PNB) is hit by yet another fraud when another news comes where Debt-Ridden PNB Buys Audi Cars Worth Rs 1.3 Crore For Three Officials.

During a regulatory filing after market hours, the country’s third largest public sector bank, PNB, reported the fraud in the non-performing asset account of DHFL “at Large Corporate Branch” in Mumbai was reported to the Reserve Bank of India (RBI). 

In the last three years, this is the fourth scandal Punjab National Bank has reported. 

While the non-banking financial company Dewan Housing Finance is currently under bankruptcy proceedings.

Prior to this, two years ago, the bank was hit by a massive Rs 13,000 crore scam involving diamantaire Nirav Modi.

Now, the public lender, declared its exposure of Rs 3,688 crore to scam-tainted mortgage lender DHFL as a fraud.

Interestingly the development comes when State Bank of India (SBI), Union Bank of India and IndusInd Bank red-flagged DHFL as fraud accounts to the Reserve Bank of India (RBI).

What Does PNB Say?

PNB said, “A fraud of Rs 3,688.58 crore is being reported by the bank to RBI in the accounts of DHFL. The bank has already made provisions amounting to Rs 1,246.58 crore, as per prescribed prudential norms” in an exchange filing. 

With this reporting, DHFL became the first financial services company to be admitted to National Company Law Tribunal (NCLT) under the insolvency and bankruptcy code for resolution under the newly introduced Section 227 of the Insolvency and Bankruptcy Code (IBC), 2016.

In November 2019, the board of DHFL was superseded by the RBI owing to governance concerns in the mortgage lender.

So far, DHFL accumulated a debt of close to Rs 85,000 crores, further being probed by the Serious Fraud Investigation Office and Enforcement Directorate for illegal money laundering and siphoning of funds.

Whats Next?

Currently, authorities are investigating DHFL’s promoters and its loan book to determine the extent of any fraud.

In the June quarter, the Punjab National Bank reported about Rs 73,500 crore of gross non-performing assets – or bad loans – for the fourth quarter of financial year 2019-20. As a percentage of total loans, gross NPAs were 14.21 per cent, as against 15.5 per cent in the previous quarter. 

In the meantime, the board of PNB have approved a fundraising plan of close to Rs 10,000 crore.

According to the bank, this will help the bank hit capital markets in the fourth quarter of this financial year to raise funds to help meet growth needs and regulatory requirements after its amalgamation with OBC and United Bank of India.