Allahabad Bank stock drops 10 pc after reports of Rs 1,775 crore fraud by Bhushan Power & Steel

Shares of government-owned Allahabad Bank slumped over 10 per cent in morning trade on Monday after the bank reported a fraud of Rs 1,775 crore by Bhushan Power and Steel Limited (BPSL) to the Reserve Bank of India (RBI).

At 11:45 am, the stock was trading 10.39 per cent down at Rs 42.25 apiece. The Allahabad Bank fraud has come to light within a week of Punjab National Bank reporting another fraud worth Rs 3,805.15 crore by BPSL to the RBI.

"We have to inform you that on the basis of forensic audit investigation findings and CBI filing FIR on suo moto basis against the company and its directors, alleging diversion of funds from banking system by the bank's borrower namely Bhushan Power and Steel Ltd (BPSL), a fraud of Rs 1774.82 crore has been reported by the bank to the RBI," Allahabad Bank said in a statement.

"The bank has already made provisions amounting to Rs 900.20 crore against the exposure of the bank in BPSL," it said in a statement.

"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 NCLT which is in advance stage and the bank expects a good recovery in the account."

Reports say BPSL is one of the most indebted companies and was one of the first referred by the RBI to a bankruptcy court to resolve a debt under the new insolvency law.

According to the Central Bureau of Investigation (CBI), Bhushan Power and Steel diverted about Rs 2,348 crore through its directors and staff from the loan accounts of PNB (IFB New Delhi and IFB Chandigarh), Oriental Bank of Commerce (Kolkata), IDBI Bank (Kolkata) and UCO Bank (IFB Kolkata) into the accounts of more than 200 shell companies without any obvious purpose.