Punjab and Sind Bank declares DHFL loan account as fraud

Public sector lender Punjab and Sind Bank on Wednesday said it has declared its exposure of ₹815.44 crore to Dewan Housing Finance Corp Ltd (DHFL) as fraud.

"...it is informed that a non-performing asset (NPA) account -- Dewan Housing Finance Corporation Limited (DHFL) -- with outstanding dues of ₹815.44 crore has been declared as fraud and reported to RBI as per regulatory requirement. Further, the bank has already made provision of ₹203.86 crore as per the prescribed prudential norms," it said in a regulatory filing.

Last month, India’s second-largest public sector lender Punjab National Bank (PNB) had declared its ₹3,688.58 crore exposure to the mortgage lender as fraud.

Once an account is declared fraud, banks need to set aside 100% of the outstanding loans as provisions, either in one go or over four quarters, according to RBI rules.

Even before PNB, private sector lender Karnataka Bank had taken similar action in June.

Earlier this year, the National Financial Reporting Authority (NFRA) had started an audit of DHFL accounts and has reached out to its administrator for documents pertaining to the company’s statutory audit for 2017-18.

The Securities and Exchange Board of India (Sebi) has also sought an update on the lender’s transaction audit.

Meanwhile, frauds reported by banks of ₹100,000 and above have more than doubled in value to ₹1.85 trillion in FY20, with the number of such cases increasing 28% in the same period, the Reserve Bank of India’s annual report showed on Tuesday.