PNB reports over ₹2,400 cr loan fraud linked to Srei ex-promoters

By Admin

27 Dec, 2025

Introduction
Punjab National Bank (PNB), one of India’s largest state-owned lenders, has reported a major loan fraud exceeding ₹2,400 crore involving the erstwhile promoters of SREI Group entities. The disclosure was made through a regulatory filing, highlighting both the scale of the fraud and the bank’s financial preparedness to absorb the impact.

Details of the Reported Loan Fraud
PNB informed that it has reported the fraud to the Reserve Bank of India (RBI) against the former promoters of two SREI entities. The total fraud amount stands at ₹2,434 crore and is divided across two loan accounts.

The first involves SREI Equipment Finance, where the fraud amount is ₹1,241 crore. The second pertains to SREI Infrastructure Finance, accounting for ₹1,193 crore. According to PNB, provisions have already been made for the entire outstanding amount linked to these accounts, ensuring no further financial shock from these exposures.

Background of SREI Infrastructure Finance
SREI Infrastructure Finance entered the construction equipment financing sector in 1989 and was once a prominent player in the segment. Following financial stress and insolvency proceedings, its board was reconstituted after the successful implementation of the National Asset Reconstruction Company Limited (NARCL) resolution plan. The National Company Law Tribunal (NCLT) approved this resolution in August 2023, marking a significant restructuring milestone for the company.

PNB’s Financial Performance in Q2 FY26
Despite the fraud disclosure, PNB reported strong financial performance for the July–September quarter of FY26. The bank posted a 14 per cent year-on-year increase in standalone net profit, reaching ₹4,904 crore in Q2FY26 compared to ₹4,303 crore in the same quarter of the previous year.

Operating profit for the quarter stood at ₹7,227 crore, while operating profit for the first half of FY26 reached ₹14,308 crore. These figures reflect year-on-year growth of 5.46 per cent for the quarter and 6.51 per cent for the half-year period.

Improvement in Asset Quality
PNB also reported notable improvement in its asset quality metrics. The gross non-performing assets (NPA) ratio declined by 103 basis points to 3.45 per cent as of September 2025, compared to 4.48 per cent a year earlier. The net NPA ratio improved to 0.36 per cent from 0.46 per cent over the same period, indicating stronger recovery and risk management.

Deposit Growth and Business Expansion
The bank recorded steady growth in deposits during the period. Savings deposits rose to ₹5,08,964 crore, registering a year-on-year growth of 4.2 per cent. Current deposits increased by 9 per cent to ₹74,215 crore, reflecting improved customer confidence and transaction volumes.

NARCL’s Rising Recovery Performance
The government-backed bad bank, NARCL, has significantly accelerated recoveries in FY26. Sources indicate that recoveries more than doubled to ₹4,192 crore, representing 13.66 per cent of total asset acquisition between April and October FY26.

At the beginning of the financial year on April 3, 2025, recoveries stood at ₹1,981 crore, or 6.79 per cent of total acquisition. This figure rose to ₹2,410 crore by July and further surged to ₹4,192 crore by October 31, 2025, demonstrating improved resolution efficiency.

Conclusion
While the reported SREI-linked loan fraud underscores ongoing challenges in legacy stressed assets, PNB’s full provisioning, improving asset quality, and robust profit growth highlight the bank’s strengthened financial position. At the same time, rising recoveries by NARCL signal progress in India’s broader banking sector clean-up efforts, reinforcing confidence in systemic resolution mechanisms.