A Punjab National Bank branch in Kolkata. Photo: Reuters
A Punjab National Bank branch in Kolkata. Photo: Reuters

Shares of India’s second largest state-owned bank Punjab National Bank (PNB) plunged more than 10% on Wednesday after it announced a loss of 134 billion rupees – just under US$2 billion – for the fourth quarter because of its bad loan woes.

In the same quarter a year ago the lender reported a standalone profit of 2.62 billion rupees. But PNB, as we know, has been hit by the biggest corporate scam in Indian history. Fraudulent transactions worth around 110 billion rupees were carried out by two diamond merchants, Nirav Modi and Mehul Choksi, who have fled the country and not been located.

The two diamond-merchants did fraudulent transactions from 2011 to 2017 with the help of a PNB employee. At least 150 fake Letters of Undertaking – a guarantee sent to other banks to provide loans to a customer – were issued during the period and bank officials allegedly misused the SWIFT interbank messaging system and made incomplete ledger entries.

PNB said it has offered 71.78 billion rupees as a provision made for losses incurred because of the Nirav Modi scam. The remaining amount will be covered in three quarters of 2017-18.

The lender had said that it has already paid 65.86 billion rupees to other banks to discharge its liabilities related to letters of undertaking and foreign letters of credit issued in an unauthorized manner.

PNB shares opened at 79.16 rupees on India’s National Stock Exchange but fell to 75.70 rupees by 11.40 am, down nearly 12%.