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Allahabad Bank Shares Plunge by 14% After Reporting Fraud of Rs 1,775 Crore by Bhushan Power

Bhushan Power and Steel had defaulted on Rs 47,700 crore worth of loans in 2017 and was one of the first 12 cases referred for resolution under the new Insolvency and Bankruptcy Code.

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Updated:July 15, 2019, 12:10 PM IST
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Allahabad Bank Shares Plunge by 14% After Reporting Fraud of Rs 1,775 Crore by Bhushan Power
File photo of an Allahabad Bank. (Photo: Reuters)
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Allahabad Bank shares crashed over 14% in intraday trade on Monday. i.e. 15 July, after the state-owned lender reported a fraud of Rs 1,775 crore by Bhushan Power and Steel to the Reserve Bank of India (RBI).

Allahabad Bank stock was trading at Rs 42.25, down 10.4%, at 11:21 am, after hitting an intra-day low of Rs 40.35. The stock has risen nearly 19% in the last one year.

In a stock exchange filing on 13 July, Allahabad Bank said: “On the basis of forensic audit investigation findings and CBI filing an FIR against the company and its directors, alleging diversion of funds from banking system by Bhushan Power and Steel, a fraud of Rs 1,774.82 crore has been reported by the bank to the RBI.”

“It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at the National Company Law Tribunal (NCLT) which is in advance stage and the bank expects good recovery in the account,” the lender added.

Allahabad Bank said it has already made provisions of Rs 900.2 crore against its exposure to Bhushan Power and Steel.

Allahabad Bank has now become the second lender to report fraud by Bhushan Power and Steel. Earlier this month, Punjab National Bank (PNB) had reported to RBI a Rs 3,800 crore fraud by the company.

Bhushan Power and Steel had defaulted on Rs 47,700 crore worth of loans in 2017 and was one of the first 12 cases referred for resolution under the new Insolvency and Bankruptcy Code. The company is also facing probe by the Serious Fraud Investigation Office (SFIO). Bhushan Steel’s former chief financial officer and director Nittin Johari was arrested by SFIO on 2 May and is in judicial custody. He was arrested for alleged fraudulent activities, including filing false documents with various banks.

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