Punjab National Bank (PNB), the country’s third-largest public sector lender, has officially reported a substantial loan fraud of over Rs 2,434 crore to the Reserve Bank of India (RBI). The disclosure, made on Friday, involves the “erstwhile promoters” of two major non-banking financial companies (NBFCs): SREI Equipment Finance Limited (SEFL) and SREI Infrastructure Finance Limited (SIFL).
The Breakdown
The New Delhi-based bank provided a specific breakdown of the fraudulent exposure across the two entities in its regulatory filing. The fraud associated with SREI Equipment Finance is valued at Rs 1,240.94 crore, while the amount linked to SREI Infrastructure Finance stands at Rs 1,193.06 crore. These figures relate to “borrowal fraud”, a term used when borrowers
misrepresent facts or divert funds with the intent to default.
Rise and Fall of SREI Group
Founded in 1989 and previously controlled by the Kanoria family, the Kolkata-based SREI Group was once a dominant force in construction equipment and infrastructure financing. However, the group collapsed under the weight of governance lapses and massive repayment defaults totalling approximately Rs 28,000 crore. In October 2021, the RBI took the rare step of superseding the boards of both SIFL and SEFL due to “mismanagement”.
The current fraud classification by PNB follows forensic audits—conducted by firms such as KPMG—that flagged irregularities including the siphoning of funds through “related-party transactions” and the “evergreening” of loans to mask non-performing assets.
Financial Resilience and Resolution
Significantly, PNB clarified that it has already made 100 per cent provisions for the entire outstanding amount of Rs 2,434 crore. This means the bank has already absorbed the potential losses on its balance sheet, ensuring that this disclosure will not have a fresh negative impact on its quarterly profits.
The SREI entities themselves have already transitioned out of their troubled past. Following a successful resolution process under the Insolvency and Bankruptcy Code (IBC), they were acquired by the government-backed “bad bank”, the National Asset Reconstruction Company Limited (NARCL), in December 2023. NARCL’s resolution plan was approved by the National Company Law Tribunal (NCLT) in August 2023, effectively distancing the current management from the alleged fraudulent actions of the former promoters.
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