Punjab National Bank disclosed a staggering ₹2,434 crore borrowal fraud linked to former SREI Group promoters, formally reporting it to the Reserve Bank of India on December 26, 2025. The bank has already made 100% provisions against these exposures to SEFL and SIFL, ensuring no fresh impact on its financials post their Corporate Insolvency Resolution Process (CIRP) completion.
The Massive Fraud Split
The fraud comprises ₹1,240.94 crore tied to SREI Equipment Finance Ltd (SEFL) and ₹1,193.06 crore against SREI Infrastructure Finance Ltd (SIFL), both under erstwhile promoters like the Kanoria family. These non-banking financial companies, once drowning in ₹32,700 crore debt, faced RBI board supersession in October 2021 due to governance lapses and evergreening practices. National Asset Reconstruction Company Ltd (NARCL) acquired both entities in December 2023 following successful CIRP resolutions via the National Company Law Tribunal.
PNB’s forensic audits flagged these legacy loans as fraudulent, aligning with RBI’s directive for timely classification of stressed assets.
Banking Sector’s Aggressive Clean-Up
This post-market disclosure under SEBI Regulation 30 underscores PNB’s transparency drive without denting quarterly profits, thanks to prior provisioning. The bank’s gross NPA ratio stands robust at 3.45% in Q3 FY26, up from 4.48% YoY, with a provision coverage ratio of 96.91%. Shares ended at ₹120.35, reflecting 17% YTD gains amid stable deposit growth and credit expansion prospects.
Similar clean-ups ripple across PSU banks, targeting old NBFC exposures amid RBI’s fraud-reporting push.
SREI’s Dramatic Downfall Revisited
SREI’s collapse highlighted shadow banking vulnerabilities, with promoters accused of fund diversion through related-party transactions and loan evergreening. Post-insolvency, banks absorbed steep haircuts, but NARCL’s intervention stabilized operations. This fraud tag by PNB closes a painful chapter from the group’s boom-to-bust saga, echoing the lender’s own post-Nirav Modi reforms.
Implications for Investors and Regulators
As PNB eyes Q4 results, focus shifts to sustained asset quality and recovery momentum. The episode reinforces India’s maturing banking governance, where legacy ghosts no longer haunt balance sheets. With full provisioning, PNB signals resilience heading into 2026’s growth cycle.
