SREI Equipment Finance fraud: PNB accuses SREI Group of serious fraud; Claims of fraud of ‘so many’ crores

• SREI Group declared fraudulent by Punjab National Bank
• Alleged fraud of more than 2,434 crores
• Bank’s big step after full forensic audit

SREI Equipment Finance Fraud: The country’s banking sector has once again been rocked by a massive corporate fraud. Public sector giant Punjab National Bank (PNB) has taken strict action against SREI Group entities, declaring their loan accounts fraudulent. The bank has taken this major step after a thorough forensic audit. Fraud Math and PNB’s Strictness Punjab National Bank disclosed in an exchange filing that total fraud of Rs 2,434 crore has been detected in entities related to the former promoters of SREI Equipment Finance and SREI Infrastructure Finance.

According to the bank, a significant portion of this amount, Rs 1,240.94 crore, is related to SREI Equipment Finance, while the remaining Rs 1,193.06 crore is related to SREI Infrastructure Finance accounts. Bank has made 100% provision for these accounts as a safety measure to avoid impact on future financial stability.

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A forensic audit has found discrepancies, which are now facing a court challenge. PNB’s action is based on the findings of the fraud forensic audit report. The report pointed to shocking irregularities, particularly improper lending to related parties and attempts to artificially revive distressed loan accounts. However, SREI Group has categorically denied these allegations and challenged the audit report. They argue that since the matter is still pending in court, it is unfair to classify it as fraud.

SREI Group’s financial situation has been deteriorating since October 2021, when the Reserve Bank of India (RBI) dissolved its board due to governance issues and payment defaults. At that time, the total dues of borrowers had reached approximately 32,750 crores. Subsequently, the RBI referred these companies to the National Company Law Tribunal (NCLT) for insolvency resolution. Before PNB, other major banks like Bank of Baroda, Union Bank and Punjab and Sindh Bank had also declared these accounts fraudulent.

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In February 2023, National Asset Reconstruction Company (NRCL) emerged as the successful bidder for these companies. NRCL’s resolution plan was approved by the NCLT in August 2023 and the acquisition process was finalized by January 2024. Meanwhile, PNB is now declaring it a fraud, indicating that despite the resolution process, the bank is in no mood to release those responsible for the fraud.