Punjab National Bank said on Thursday it had reported loans made to Dewan Housing Finance Corporation Ltd worth Rs 3,689 billion ($491 million) to India’s central bank as “fraud.”In a regulatory filing after market hours, the country’s third-largest public sector bank, PNB, said 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). This is the fourth scandal Punjab National Bank has reported in three years. Non-banking financial company Dewan Housing Finance is currently under bankruptcy proceedings. Indian state-owned lender PNB, which was hit by a $2 billion fraud involving billionaire Nirav Modi in 2018, had already set aside Rs 125 billion in provisions for the loans to DHFL, which is in bankruptcy proceedings.
Indian banking regulations require the provision of an account affected by fraud to be 100%, made over four quarters. DHFL, which was once one of India’s top “shadow” lenders, accumulated total debts of almost Rs 1 trillion and then failed to honor dues to its creditors. Indian authorities are investigating DHFL’s promoters and its loan book to determine the extent of any fraud. Other banks including State Bank of India and Union Bank have also reported DHFL’s accounts as fraudulent.