PNB fraud: Bank stocks decline, shares of Union Bank, Allahabad Bank hit 52-week low

The BSE Bankex was also trading in the negative and fell to a low of 28,598.89 points, down 133.47 points, in morning trade. Photo: Mint

New Delhi: Shares of Union Bank of India on Friday declined more than 3% in morning trade after the lender said it has an exposure of Rs1,900 crore to the Punjab National Bank (PNB) fraud case.

Union Bank shares fell 3% to touch an intra-day low of Rs116.50, which was also its 52-week low level, on BSE. The stock slumped to its 52-week low level of Rs116.50 on NSE as well, down 3.07% over its previous close.

“We wish to inform you that the bank through our foreign branches has been taking exposure with Punjab National Bank (PNB) as counterparty under various Letters of Undertakings (LoU) issued through authenticated SWIFT message,” Union Bank of India said in late night filing to stock exchanges.

State-owned Punjab National Bank on 14 February said it has detected a Rs11,400 crore scam where billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from a branch in Mumbai to secure overseas credit from other Indian lenders. While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on LoUs issued by PNB.

Shares of Allahabad Bank also fell to the 52-week low level of Rs53.10, and Axis Bank fell 1.23% to an intra-day low of Rs537.05 on BSE. Meanwhile, the BSE Bankex was also trading in the negative and fell to a low of 28,598.89 points, down 133.47 points, in morning trade. Shares of Kotak Bank, Federal Bank, IndusInd Bank and those of heavyweights like State Bank of India and ICICI Bank were also trading with losses.

A fortnight after the scam was first reported, PNB chairman and managing director Sunil Mehta on Thursday said it has the capability to recover the dues from Nirav Modi and promised to take action against all wrongdoers.

As the Enforcement Directorate conducted multiple searches at establishments linked to Modi, seizing diamonds, jewellery and gold worth Rs5,100 crore and sealing six properties, the finance ministry said recovery would be made and nobody would be spared. PNB has already suspended 10 officers and referred the matter to the Central Bureau of Investigation (CBI).