The stocks, however, somewhat recovered after it declined 14.52 per cent to hit an intra-day low of Rs 40.30 per share minutes after the days' trade started.
The shares settled at Rs 43.50, lower by Rs 3.65 or 7.74 per cent from the previous close of Rs 47.15 apiece.
Allahabad Bank became the second public sector bank after Punjab National Bank to report of a borrowal fraud by the bankrupt steel company.
"On the basis of forensic audit investigation findings and CBI filing FIR, on suo moto basis, against the Company and its Directors, alleging diversion of funds from banking system by the Bank's borrower, namely Bhushan Power & Steel Ltd (BPSL), a fraud of Rs 1,774.82 crore has been reported by the Bank to the Reserve Bank of India," the company said in a regulatory filing on Saturday.
The Allahabad Bank, however, added that it has already made provisions amounting to Rs 900.20 crore against the exposure in the company.
"It has been observed that the company has misappropriated bank funds and manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at the NCLT which is in advance stage and the bank expects good recovery in the account," the bank added.
Punjab National Bank had on July 6 reported a similar borrowal fraud by Bhushan Power & Steel to the tune of Rs 3,805.15 crore, of which the bank has already made provisions amounting to Rs 1,932.47 crore.
( With inputs from IANS )