PNB declines over 3%

Shares of Punjab National Bank (PNB) declined up to 3% in early trade today after the lender disclosed a legacy fraud exposure linked to erstwhile promoters of SREI Equipment Finance and SREI Infrastructure Finance. The stock fell to a low of Rs 116.6 before recovering marginally, even as broader markets remained under pressure.

PNB informed exchanges that it has reported a fraud of Rs 2,434 crore to the Reserve Bank of India, pertaining to loans extended to SREI Equipment Finance Ltd (SEFL) and SREI Infrastructure Finance Ltd (SIFL). The bank clarified that the exposure relates to erstwhile promoters of the two companies, which are now under new ownership following insolvency proceedings. The entire amount has already been fully provided for in earlier years, ensuring there is no incremental financial impact on the bank’s balance sheet.

The disclosure comes in the context of regulatory reporting requirements and follows the RBI’s earlier action against the SREI group, which was taken over by the central bank in 2021 amid governance concerns. The assets were subsequently resolved through the insolvency process, with National Asset Reconstruction Company (NARCL) acquiring the entities in December 2023.

Despite the near-term stock reaction, analysts note that the development does not alter PNB’s underlying fundamentals. The bank has significantly strengthened its balance sheet over the past few years, with improved asset quality, stronger capital adequacy and steady profitability. For the September quarter, PNB reported a 14% year-on-year rise in net profit to Rs 4,904 crore, while operating profit grew 5.5% to Rs 7,227 crore. Asset quality metrics have continued to improve, with lower slippages and higher provision coverage.

Market participants believe the reaction reflects near-term sentiment rather than a structural concern. With legacy stress largely behind it and credit costs normalising, PNB’s medium-term outlook remains supported by improving loan growth, stable margins and a stronger capital position. Analysts expect the stock’s performance to be driven more by earnings delivery and sectoral trends rather than legacy issues that are already fully provided for.