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    Forensic audit of Reliance Home Finance proved there was diversion of funds: PNB source

    Synopsis

    “The account was declared fraud based on the forensic audit. At a time when capital is so scarce, why should I declare an account fraud for no reason. It is based on facts and figures,” the PNB official said.

    anil ambani BCCL
    PNB’s exposure to RHFL stood at Rs 80 crore as of July 3 last year.
    Punjab National Bank (PNB) declared Reliance Home Finance Ltd’s (RHFL) account with it as a “fraud account” after a forensic audit proved that there was diversion of funds, an official at the state-run lender said.

    “The account was declared fraud based on the forensic audit. At a time when capital is so scarce, why should I declare an account fraud for no reason. It is based on facts and figures,” the official said.

    Upon declaring an account as fraud, banks are required to make provisions for 100% of the outstanding loan amount as per Reserve Bank of India guidelines. PNB had Rs 80 crore of exposure to the Anil Ambani-led Reliance Group company as of July 3 last year.

    In January, RHFL informed the stock exchanges that the audit had not found any evidence of diversion of funds.

    RHFL did not respond to an email seeking comment till press time Wednesday.

    While the same forensic report was seen by all members in the consortium of lenders to RHFL, PNB was the sole one to declare the account a fraud. Led by Bank of Baroda, the consortium also included State Bank of India, Canara Bank, Axis Bank, Bank of India, Federal Bank and Bank of Maharashtra.

    “Normally, the lead bank declares fraud and other banks follow suit. But it is the individual bank's call,” the official said, adding: “Other banks, if they feel their money has not been diverted and the account is regular since there was nothing wrong in the movement of funds, then even if PNB declares it a fraud, they can well not declare it a fraud.”

    According to an invitation for resolution plans for RHFL by Bank of Baroda, the consortium’s outstanding loans to the company totalled Rs 7,109 crore as on July 3, 2019.

    PNB’s move is likely to affect the risk settings of RHFL and alter the market and public perception of the company, the official added.

    In another case, PNB had declared its Rs 3,688 crore exposure to mortgage financier Dewan Housing Finance as fraud earlier last month.

    Meanwhile, the PNB board has approved a plan to raise Rs 10,000 crore of capital in July by selling shares through a private placement, qualified institutional placement, public offer, rights issue or any other modes.


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