PNB’s fraud engulfs State Bank of India after Chief Rajnish Kumar confirms exposure; stock tanks 3%

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Updated: Feb 16, 2018 4:06 PM

India's biggest banking fraud in country's second largest PSU bank Punjab National Bank has now engulfed nation's largest lender State Bank of India. State Bank of India has also been captured by the massive banking scam involving "fraudulent and unauthorised" LOUs between PNB and alleged diamond merchant Nirav Modi.

Shares of SBI closed down 2.62% at Rs 271.4 on Friday on NSE. (Image: Reuters)

India’s biggest banking fraud in country’s second largest PSU bank has now engulfed nation’s largest lender State Bank of India. India’s largest bank by assets State Bank of India has also been captured by the massive banking scam involving “fraudulent and unauthorised” LOUs (Letter of Undertakings) by the alleged diamond merchant Nirav Modi with Punjab National Bank and several other branches of Indian lenders situated overseas. In the latest development today, State Bank of India said that the bank has an exposure of $212 million (about Rs 1,360 crore) with respect to the LOUs principally issued by Punjab National Bank. However, the bank doesn’t have any direct exposure to the jewellery designer Nirav Modi.

Following the confirmation, the stock of State Bank of India crumbled as much as 3.17% to a day’s low of Rs 270 on BSE while the stock tanked 3.1% to the day’s low of Rs 270.05 on NSE. A huge trading volume was observed in the shares of State Bank of India, as at the closing of Friday’s session, more than 3.4 crore shares exchanged hands on both NSE and BSE with about 3.03 crore shares on NSE alone. Shares of SBI closed down 2.62% at Rs 271.4 on Friday on NSE.

“We don’t have any direct exposure on Nirav Modi but we do have some exposure on Punjab National Bank, PTI quoted Rajnish Kumar as saying. According to a PTI report, State Bank of India has some exposure to Gitanjali Gems which is owned by Mehul Choksi, uncle of Nirav Modi. Rajnish Kumar said that the exposure to Gitanjali Gems is “small and we are not worried”. Shares of Gitanjali Gems got locked in the lower circuit for the second consecutive day on Friday. The stock of Gitanjali Gems had fallen 35.76% in the course of last two days to Rs 37.45 on NSE.

Shares of the fraud-hit Punjab National Bank declined as much as 6% to the day’s low of Rs 120.55 before settling down 1.68% at Rs 126.1 on Friday on NSE. The stock of Punjab National Bank had fallen about 22% in the three-day period from 14 to 16 February 2018. Following the massive decline in the share prices of PNB, about Rs 8,746 crore has been wiped off from the market capitalisation of the Punjab National Bank. At the end of Friday’s trading session, PNB held a market capitalisation of Rs 30,477.5 crore on BSE.

Meanwhile today, Indian stock markets finished on a negative note with the Sensex losing as many as 286 points and Nifty concluding below 10,500-mark. The S&P BSE Sensex tumbled 286.71 points or 0.84% to close at 34,010.76 whereas NSE Nifty lost 93.2 points or 0.88% to end at 10,452.3.

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