IDBI Bank reports fraud of 772 crore, shares fall 3.5 percent

Photo Credit: Live Mint.

IDBI Bank Ltd said on Tuesday fraudulent loans of 7.72 billion rupees ($118.8 million) were issued from five of its branches in the states of Andhra Pradesh and Telangana, sending its shares lower on Wednesday.

The Economic Times reported, that some of the loans, which were issued during fiscal years 2009-2013 for fish farming businesses, were obtained against fake lease documents of non-existent fish ponds and by inflating the value of collateral, the company said.

The company found major lapses in processing and disbursing the loans by two of its officials. The lender dismissed one of the officials, while the other official had already retired, it said.

“It was later discovered that some of these loans (52 aggregators with principal outstanding of ₹772 crore) were fraudulently obtained by some industrialists who stood as common guarantor for these loans and were referred to as aggregators by submitting fake lease documents of non-existent fish ponds,’’ the bank said.

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Last month, in what is reported to be the largest ever banking scam in India, the Punjab National Bank, India’s third largest lender, detected fraudulent transactions worth $1,771.7 million (Rs.10,000 cr) in its Mumbai branch, resulting in a sharp decline in its share prices.

The Bank share prices slipped 7.8 percent after the fraud detection.

“The bank has detected some fraudulent and unauthorized transactions in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions, other banks appear to have advanced money to these customers abroad,” said PNB to BSE Ltd.

The bank said these transactions were contingent in nature and liability arising out of these on the bank would be decided based on the law and genuineness of underlying transactions.

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