Indian Bank Hit by Third Huge Fraud

One of India’s biggest state-run banks said it had fallen victim to its third multimillion-dollar fraud in as many years, a stark illustration of the bad debts and weak defenses against misconduct that plague the country’s financial system, the Wall Street Journal reported. Punjab National Bank said yesterday that a customer, the ailing property lender Dewan Housing Finance Corp., had defrauded it of the equivalent of $491 million. In a separate statement, the bank said that its board had approved a plan to raise about $1.33 billion by selling shares and bonds. In a stock-exchange filing, India’s second largest state-owned lender said it had reported the Dewan Housing case to India’s central bank. Punjab National Bank said it took a $166 million provision, based on “prescribed prudential norms.” It didn’t give any details of the alleged fraud. The Reserve Bank of India took control of Dewan Housing last year, citing corporate-governance concerns and payment defaults. The central bank put an administrator in charge of the company and started an insolvency-resolution process. Read more. (Subscription required.)