PNB Reports ₹2,434 Crore Fraud Linked to SREI Promoters

Introduction to the Disclosure

Punjab National Bank (PNB), a state-owned lender, has officially reported a borrowal fraud amounting to ₹2,434 crore to the Reserve Bank of India (RBI). The disclosure, made on December 26, 2025, links the fraud to the erstwhile promoters of SREI Equipment Finance Ltd (SEFL) and SREI Infrastructure Finance Ltd (SIFL). Despite the substantial figure, the bank has confirmed that it has already made 100% provisions for the entire outstanding amount, mitigating any new impact on its financial statements.

Breakdown of the Fraudulent Accounts

The fraud pertains to two specific loan accounts associated with the Kolkata-based SREI Group. According to the regulatory filing, the exposure is split as follows:

• SREI Equipment Finance Ltd (SEFL): A fraud of ₹1,240.94 crore.
• SREI Infrastructure Finance Ltd (SIFL): A fraud of ₹1,193.06 crore.

This formal classification of the accounts as 'fraud' is a procedural step following forensic audits, marking a crucial move in addressing legacy stressed assets. The action follows the RBI's intervention in 2021, when it superseded the boards of both SREI entities due to governance concerns and significant defaults.

The SREI Insolvency Context

The SREI Group's financial troubles culminated in one of India's major non-banking financial company (NBFC) collapses. With total defaults approaching ₹32,700 crore, the RBI initiated insolvency proceedings against SEFL and SIFL in October 2021. The companies subsequently underwent the Corporate Insolvency Resolution Process (CIRP) under the National Company Law Tribunal (NCLT). In August 2023, the resolution plan submitted by the National Asset Reconstruction Company Ltd (NARCL) was approved, leading to the acquisition of the distressed entities and the reconstitution of their boards.

Financial Implications and Proactive Provisioning

For investors and stakeholders, the most critical aspect of this disclosure is PNB's proactive financial management. The bank has already set aside funds to cover the entire ₹2,434 crore exposure. This 100% provisioning means the potential loss was accounted for in previous financial quarters. Consequently, this announcement does not create a new financial burden on the bank's profitability or capital adequacy. It is essentially a reclassification of a known bad loan, providing regulatory closure to a long-standing issue.

Key Financial Metrics at a Glance

To understand the context of this fraud report, it is useful to look at PNB's recent financial health. The bank has shown significant improvement in its asset quality.

These figures indicate that despite legacy challenges, PNB's overall financial stability remains robust, with non-performing assets on a declining trend and a strong capital buffer.

Market Reaction and Stock Performance

The market's reaction to the fraud disclosure was notably subdued, reflecting an understanding that the financial impact had already been absorbed. On the day of the announcement, shares of Punjab National Bank closed just 0.5% lower at ₹120.35 on the BSE. This minimal movement suggests that investors viewed the news as a procedural update rather than a new crisis. The stock has demonstrated positive performance over the year, gaining approximately 17% year-to-date, supported by improving financials and positive analyst outlooks.

Analyst Outlook on PNB

Several brokerage firms have maintained a positive stance on Punjab National Bank, citing its improving asset quality and growth prospects. Before this announcement, firms like Motilal Oswal, Geojit Financial Services, and Emkay Global had issued 'buy' ratings on the stock with target prices ranging from ₹125 to ₹135. Analysts believe the bank's focus on retail loan growth, particularly in housing and vehicle segments, will continue to drive performance. The resolution of large legacy accounts like SREI, even through fraud classification, is seen as a step towards cleaning up the balance sheet for future growth.

Conclusion: A Legacy Issue Resolved

The reporting of the ₹2,434 crore fraud by Punjab National Bank is a significant but anticipated development. It represents the formal closure of a chapter related to the SREI Group's collapse. By making full provisions, PNB has insulated its financial health from any further shocks from these accounts. The move underscores a broader trend among public sector banks to transparently address and resolve legacy non-performing assets. For investors, the focus remains on the bank's improving core performance, declining NPA ratios, and strong capital position, which collectively point towards a stable outlook.