PNB sought to soothe investors after discovery of massive fraud

Vastavam web: Punjab National Bank, India’s second-largest state-run lender, sought to soothe investors on Thursday after the discovery of a $1.77 billion scam at a single branch sent its shares plunging and raised fears about the scale of fraud in the sector.Investigators launched raids across Mumbai and New Delhi, targeting offices and homes linked to Nirav Modi, a billionaire jeweler and diamond merchant the bank has accused of being at the center of the fraud.At a packed news conference in New Delhi, PNB executives said the lender was working with regulators to determine how the largest fraud to take place in India could have gone undetected for years.

“This cancer that’s been going on since 2011, we have brought it out and we are resolving it,” PNB’s Chief Executive Sunil Mehta told the news conference.News of the alleged fraud sent PNB’s (PNBK.NS) shares down 12 percent on Thursday, their biggest daily percentage fall since May 2004, after falling 9.8 percent on Wednesday when it made its disclosure.The steep fall has wiped off $1.27 billion from PNB’s market capitalization in the past two days. At Thursday’s close, the bank was valued $4.87 billion.The investigators were focusing mainly on the jewelery stores and other businesses controlled by Modi, whose outlets spread from New York to Hong Kong and count Hollywood star Kate Winslet among their clients.Law minister Ravi Shankar Prasad said the authorities had seized assets worth 13 billion rupees ($203 million) from Modi and initiated action to revoke his passport.