The country's fourth largest bank, Punjab National Bank (PNB), on Wednesday said it had detected some "fraudulent and unauthorised" transactions worth about $1.77 billion (over Rs 11,354 crore) at one of its branches in Mumbai. That, incidentally, is just short of Rs 4,000 crore less than the total income recently declared by the bank for the third quarter (Q3) of this fiscal.
After the bank found out about these 'fraudulent' transactions, it suspended its 10 officials, including a branch deputy manager. It is pertinent to note that the case also involve famous jewellery designer Nirav Modi, who, among others, has been accused of defrauding PNB.
For the quarter ending December 31, 2017, PNB declared that its total income stood at Rs 15,257 crore and net profit at Rs 230 crore. So the detected fraud is 49 times its actual profit for the quarter ending December 31, 2017.
In a regulatory filing, the bank disclosed that the transactions were "for the benefit of a few select account holders with their apparent connivance" and that "based on these transactions other banks appear to have advanced money to these customers abroad". Although PNB did not name the people involved, it said that "The matter was already referred to law enforcement agencies to examine and book the culprits as per law of the land. The bank is committed to clean and transparent banking." PNB added that it would evaluate later whether it faces any liability arising out of the transactions. "In the bank these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions."
This is the second time in as many weeks that India's second-biggest state-run lender has had to deal with allegations of fraudulent transactions. Last week, Indian federal agents said they had launched an investigation into billionaire jeweller Nirav Modi over accusations that he and others defrauded PNB of $44 million. It is not yet known whether the latest disclosure is related to or separate from this case.
In any case, the bank's share price has taken a hit today. PNB shares are currently trading 4% lower, having fallen as much as 7.8% intraday, reportedly wiping out nearly Rs 3,000 crore of investor wealth in the bargain.
(With agency inputs)