India's Allahabad Bank on Saturday became the second Indian state-owned bank to report a major alleged fraud by bankrupt steelmaker Bhushan Power & Steel Ltd this month, adding to concerns about a banking industry burdened with bad debts. Allahabad Bank said in a statement that it had told the Reserve Bank of India, the nation's central bank, that it had identified a fraud worth $259 million in Bhushan's accounts.
On July 6, state-run Punjab National Bank (PNB) said it had reported an alleged fraud of $554.6 million in the steelmaker's accounts. "It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks," Allahabad Bank said in its statement, adding that it had made provisions of about $131 million against the bank's exposure. Bhushan Power and Steel, one of India's most indebted companies, was among the first 12 companies referred by the RBI to a bankruptcy court for a debt resolution process under India's new insolvency law.
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