PNB Loses Rs 8,000 Cr in Market Cap Over Nirav Modi Racket
The quantum of the fraud itself is more than eight times the bank’s annual profit.
Stung by a massive fraud worth over Rs 11,000 crore, state-run Punjab National Bank (PNB) witnessed a sharp drop in its market valuation by Rs 8,000 crore in two days – an amount equivalent to over six-times its full-year profit.
PNB on Thursday extended its fall for the second straight session and ended the day 12 percent lower at Rs 128.35 on BSE. The stock had fallen 10 percent on Wednesday, after the lender said it had detected a Rs 11,400 crore ($1.77 billion) fraud at its Mumbai branch.
The quantum of fraud is more than eight times the bank’s annual profit.
The state-owned bank said it had detected a $1.77 billion fraud in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking (LoUs) from one of its branches for overseas credit from other Indian lenders.
PNB has suspended 10 officers over the scam and referred the matter to CBI for investigation.
Meanwhile, shares of PNB Housing Finance settled for the day at Rs 1199.00, down 4.30 percent on the BSE.
While PNB did not name other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on LoUs issued by PNB.
An LoU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.
Consequently, shares of Union Bank of India settled down 0.95 percent, Allahabad Bank ended the day down 2.31 percent and Axis Bank was quoted down 0.17 percent.
This could be the biggest banking fraud in India as its quantum was bigger than an estimated Rs 9,000 crore scam at erstwhile Satyam Computers.
Track all live updates from the Nirav Modi fraud case here.
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