PNB declares Rs 2,434 crore alleged loan fraud against former promoters of Srei firms

New Delhi, Dec 27 Punjab National Bank (PNB) has declared a Rs 2,434 crore alleged loan fraud by the former promoters of Srei Equipment Finance and Srei Infrastructure Finance.

In a late evening exchange filing, the state-run PNB said that “Pursuant to the applicable provisions of SEBI (LODFR) Regulations, 2015 and the Bank’s Policy for determining materiality of events/information required to be reported to the Stock Exchanges, it is hereby informed that the bank has reported borrowal fraud to RBI against the erstwhile promoters of Srei Equipment Finance and Srei Infrastructure Finance".

PNB said that of the total fraudulent borrowings, Rs 1,240.94 crore is related to Srei Equipment Finance and the remaining Rs 1,193.06 crore is related to Srei Infrastructure Finance.

The public sector lender also said it has 100 per cent provisions for these loans. The bank said the declaration of these two accounts as frauds is based on a forensic audit, which pointed to irregularities such as loans to connected parties and potential evergreening of loans.

However, Srei founder Hemant Kanoria has challenged the forensic audit report as the basis for the fraud classification, noting the matter is subjudice.

Other banks such as Punjab & Sind Bank, Bank of Baroda, and Union Bank of India have also earlier declared a loan fraud in connection with Srei companies.

The Srei group has been undergoing an insolvency resolution process since 2021, and the National Company Law Tribunal has approved a resolution plan submitted by the National Asset Reconstruction Company in 2023. The Srei group was sent to the NCLT by the Reserve Bank in October 2021 after it had found governance issues and defaults and the regulator superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance.

In February 2023, NARCL emerged as the successful bidder for SIFL and SEFL which together owed Rs 32,750 crore to lenders. NARCL won the bid in February 2023, got the NCLT approval in August 2023, and finalised the acquisition by January 2024.

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