Punjab National Bank (PNB) has reported an alleged loan fraud amounting to Rs 2,434 crore by the former promoters of Srei Equipment Finance and Srei Infrastructure Finance. The bank disclosed this information in a late evening filing to the stock exchanges, citing SEBI regulations and the bank’s policy on material events. Out of the total fraudulent borrowings, Rs 1,240.94 crore is linked to Srei Equipment Finance, and Rs 1,193.06 crore is tied to Srei Infrastructure Finance.
The state-run lender has stated that it has made full provisions for these loans. The decision to classify these accounts as frauds was made following a forensic audit that uncovered irregularities like loans to related parties and potential loan evergreening. The Srei group has contested the fraud classification, citing the ongoing legal proceedings as the reason for their challenge.
Several other banks, including Punjab & Sind Bank, Bank of Baroda, and Union Bank of India, have previously declared loan frauds related to Srei companies. The Srei group has been undergoing insolvency proceedings since 2021, with the National Company Law Tribunal approving a resolution plan submitted by the National Asset Reconstruction Company in 2023. The group was referred to the NCLT by the Reserve Bank in 2021 due to governance issues and defaults, leading to the supersession of the boards of Srei Infrastructure Finance and Srei Equipment Finance.
In February 2023, the National Asset Reconstruction Company emerged as the successful bidder for Srei Infrastructure Finance and Srei Equipment Finance, which collectively owed Rs 32,750 crore to lenders. The acquisition process, initiated in February 2023, received NCLT approval in August 2023 and was finalized by January 2024.
