Punjab National Bank says scam may cost bank nearly $2 bln (updated)

Gitanjali Gems

27/02/2018 05:22

(Updates with details, background; adds dateline) 
    MUMBAI, Feb 27 (Reuters) - India's Punjab National Bank 
(PNB)  PNBK.NS  said the amount of fraudulent transactions 
involving the bank could go up by about $204 million in addition 
to the $1.77 billion it had earlier reported, sending shares 
down as much as 8.9 percent to a 20-month low. 
    PNB's announcement late on Monday also sent other shares of 
state-run lenders lower, reinforcing concerns about the 
escalating financial cost of the unauthorised loans steered 
towards billionaire jewellers Nirav Modi and his uncle Mehul 
Choksi, owner of Gitanjali Gems Ltd  GTGM.NS .  L4N1QD2DQ  
    The scale of the fraud, the biggest to hit an Indian lender, 
has stunned the country and put the lack of supervisory 
oversight by the central bank and auditors under the spotlight. 
 urn:newsml:reuters.com:*:nL4N1QA13A 
    Local media reported on Tuesday the Central Bureau of 
Investigation, the country's federal police, had raided the 
offices of law firm Cyril Amarchand Mangaldas, which had 
represented Nirav Modi for a while.  
    Cyril Amarchand did not immediately respond to a request for 
comment, while a CBI media official was not immediately 
reachable.  
    Alpesh Mehta, deputy head of research, Motilal Oswal 
Securities, said markets were still trying to determine the 
scale of the financial impact since other lenders had given 
loans to Modi and Choksi based on letters of undertaking (LOUs), 
or guarantees, provided by PNB. 
    "People would have never expected these kind of losses in a 
state-owned bank and it's difficult to ascertain the amount of 
damage it has caused," Mehta said referring to PNB. 
    At least a dozen people - six from the bank and six more 
from Modi's and Choksi's companies - have been arrested, while 
investigators have seized a number of properties from the two, 
including jewellery and luxury vehicles.  urn:newsml:reuters.com:*:nL4N1QB2XZ 
    Both Modi and Choksi, whose whereabouts are unknown, have 
said they are innocent.  urn:newsml:reuters.com:*:nL4N1QE0AR 
    PNB shares were trading down 8.2 percent at 0500 GMT, after 
earlier hitting its lowest since June 2016. 
    A sub-index of state-run lenders, the PSU Bank index 
 .NIFTYPSU , was down 2.5 percent, while top-ranked State Bank 
of India was down 2 percent. 
 
 (Reporting by Arnab Paul in BENGALURU and Abhirup Roy in MUMBAI 
Writing by Rafael Nam 
Editing by Raju Gopalakrishnan) 
 ((arnab.paul@thomsonreuters.com; +91 8067491310; Reuters 
Messaging: arnab.paul.thomsonreuters.com@reuters.net)) 
 
Keywords: PUNJAB NATL BANK FRAUD/