Daijiworld Media Network - Mumbai

Mumbai, Dec 26: State-run Punjab National Bank (PNB) has reported a loan fraud of Rs 2,434 crore to the Reserve Bank of India against the former promoters of Srei Equipment Finance and Srei Infrastructure Finance.

In an exchange filing on Friday, PNB said Rs 1,240.94 crore of the fraudulent exposure pertains to Srei Equipment Finance, while Rs 1,193.06 crore relates to Srei Infrastructure Finance. The public sector lender added that it has made 100 per cent provisioning for both accounts.

Other lenders, including Punjab & Sind Bank, Bank of Baroda and Union Bank of India, had earlier classified the Srei accounts as fraud.

PNB said the fraud declaration was based on a forensic audit conducted by KPMG, which flagged irregularities such as lending to connected parties and possible evergreening of loans.

However, Srei founder Hemant Kanoria has challenged the findings of the forensic audit, stating that the matter is sub judice and disputing the report being used as the basis for classifying the accounts as fraud.

The Srei group has been undergoing insolvency proceedings since 2021 after the RBI flagged governance lapses and loan defaults, and subsequently superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance in October that year.

In February 2023, the National Asset Reconstruction Company Ltd (NARCL) emerged as the successful bidder for both entities, which together owed lenders about Rs 32,750 crore. The resolution plan received approval from the National Company Law Tribunal in August 2023 and was fully implemented by January 2024.

NARCL paid around Rs 14,301 crore as total consideration for the Srei accounts, including an upfront cash payment of about Rs 3,180 crore, with the remaining amount structured through deferred payments and instruments such as optionally convertible debentures.