State-run lender Punjab National Bank (PNB) has reported a loan fraud of ₹2,434 crore linked to the former promoters of Srei Group companies to the banking regulator, the Reserve Bank of India (RBI).
In a regulatory filing on Friday, PNB said it has classified the account as a borrowing fraud involving SREI Equipment Finance Ltd (SEFL) and SREI Infrastructure Finance Ltd (SIFL)—both previously controlled by the Kanoria family.
What the fraud involves
According to the filing, the alleged fraud amount is split between the two entities:
- ₹1,240.94 crore related to SREI Equipment Finance Limited (SEFL)
- ₹1,193.06 crore related to SREI Infrastructure Finance Limited (SIFL)
PNB clarified that it has already made 100% provisions against the entire outstanding amount, meaning the bank has fully accounted for potential losses from this exposure.
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RBI action and background
The Srei crisis has been unfolding for a while. Back in October 2021, the RBI stepped in and superseded the boards of both SIFL and its wholly owned arm SEFL, citing concerns over governance and financial management. Soon after, insolvency proceedings were initiated under the Insolvency and Bankruptcy Code (IBC).
At the time, the two companies together had a financial debt of around ₹32,700 crore, making it one of the larger non-banking finance collapses in recent years.
What happened after insolvency
Following the resolution process, the stressed assets were taken over by National Asset Reconstruction Company Ltd (NARCL) in December 2023, officially ending the Kanoria family’s control over the group.
While operations have since moved to new ownership, banks are now formally flagging suspected irregularities from the earlier period—an important step that allows regulators and investigative agencies to take the process forward.
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Why this matters
For the banking system, reporting a loan account as fraud isn’t just a formality. It triggers tighter scrutiny, potential criminal investigation, and reinforces accountability for past management actions. For lenders like PNB, it also signals that legacy stress is being cleaned up, even if it comes years after the original problems surfaced.
