The major fraud scandal at India’s Punjab National Bank (PNB) has had a negative impact on stocks of other state-owned banks with the Nifty PSU (Public Sector Undertaking) Bank Index suffering a steep fall and major investors losing huge sums of money.
The index has fallen 22% from its January high, erasing one trillion rupees (US$15.4 billion) in value, Business Standard has reported.
PSU bank index had been strong ever since the Indian government announced a recapitalization plan for state-owned banks on October 24 last year.
But after the fraud at PNB came to light, India’s largest bank, the State Bank of India, has lost 162 billion rupees ($2.5 billion), followed by PNB (109 billion rupees or $1.7 billion), Bank of Baroda (55 billion rupees or $848 million) and Bank of India (18.5 billion rupees or $285 million), the daily added.
The government is the majority shareholder of these lenders but it has seen the value of its holdings eroded by 590 billion rupees ($9.1 billion). Institutional investor LIC’s stake is now worth 120 billion rupees ($1.85 billion) less. Altogether, the two have lost more than $10 billion after the bank scandal was revealed, Bloomberg Quint has said.
Investors feel the scam is not restricted to PNB and fear that similar frauds may have occurred at other banks and has yet to be detected.