PNB reports fraud of Rs 2,000 crore in IL&FS Tamil Nadu Power Company's loan

In a big blow to the banking sector, Punjab National Bank (PNB) has reported a borrowing fraud of over Rs 2,000 crore in the non-performing account of IL&FS Tamil Nadu Power Co. Ltd. The state-owned lender said that it made a provision of Rs 824 crore as per Reserve Bank of India's prudential norms.

A fraud of Rs 2,060.14 crore is being reported by PNB to Reserve Bank of India in the accounts of the company, the Bank said in a filing. "A fraud of Rs 2060.14 crore is being reported by the bank to RBI in the accounts of the company," PNB said in a regulatory filing to stock exchanges.

Punjab National Bank added that it has already made provisions amounting to Rs 824.06 crore, as per prescribed prudential norms. On Tuesday, PNB shares closed 2.45% lower at Rs 35.90 a piece on NSE. However, this is not the only bad loan for IL&FS Tamil Nadu Power Company.

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A month ago, Punjab & Sind Bank (PSB) declared bad asset related to IL&FS Tamil Nadu Power Company, with dues of over Rs 148 crore. As per the bank's policy on determination and disclosures on material events, Punjab & Sind Bank said it has declared this non-performing account (NPA) as a fraud account.

The IL&FS Tamil Nadu Power company had a payment due of Rs 7181 crore at the end of March 31, 2021, according to its annual report. It was a special purpose vehicle set up by Infrastructure Leasing & Financial Services Ltd (IL&FS) under its energy platform for implementation of thermal power projects at Cuddalore in Tamil Nadu.

Reserve Bank of India (RBI) rules state that lenders must recognise incipient stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA).