Security & Fraud

Punjab National Bank Loses $556M To Fraudulent Buying

Punjab National Bank Discovers Second Defrauder

Punjab National Bank revealed that it had been defrauded $556 million from a struggling borrower, Bhushan Power & Steel, according to a report by The Wall Street Journal.

This is the second huge incident that’s come to light, as two men with the country’s largest jeweler, Firestar Diamond, were accused of manipulating bank insiders and blind spots to borrow billions without the proper approval from the bank, or even most knowing about it.

The Reserve Bank of India called the diamond company defrauding a lack of internal controls.

Punjab National Bank filed complaints with the Reserve Bank of India as well as the police after discovering Bhushan’s involvement with the loan money.

“The company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks,” Punjab National Bank said.

The bank was auditing its dealings with Bhushan Power & Steel when it figured out it was scammed. Bhushan is currently dealing with its own debt issues in bankruptcy court.

Punjab National Bank said it was expecting to get some of the money back, although it didn’t specify how much.

“The Bank expects good recovery in the account,” it said.

The diamond firm related to the other scandal, Firestar Diamond, recently filed for bankruptcy in the U.S. The company listed $100 million in assets and liabilities and said that “liquidity and supply chain issues” were the reason it had to file for bankruptcy. 

Two employees at a Mumbai branch of Punjab National Bank have been accused of conspiring with the diamond firm by giving it fake documents that let it obtain credit.

The top bureaucrat at the Department of Financial Service, Rajeev Kumar, called for leadership at Indian banks to come up with a blueprint to make sure banks are prepared for the associated risks of borrowing. He said that boards “should assign clear accountability of senior functionaries for implementation and compliance.” He also said that lenders should take actions to identify existing weaknesses in already existing arrangements. 

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