PNB Reports Fraud of Rs 2,000 Crore by IL&FS Tamil Nadu Power

Synopsis- On similar lines, Punjab & Sindh Bank (another Public Sector Bank), just a month ago had reported a fraud by IL&FS in which the dues were over 148 crore rupees. The bank on February 15 reported to the central bank stating that it had declared the IL&FS’s bad assets as a fraud account.

Punjab National Bank has reported a loan fraud by IL&FS (Infrastructure Leasing & Financial Services) Tamil Nadu Power of over 2,060.14 crore rupee in the non-performing account (NPA) in its filing to Reserve Bank of India. The bank in the filing revealed that it has made provisions of 824.06 crore rupees according to the prescribed prudential norms.

“A fraud of Rs. 2060.14 Crore is being reported by Bank to RBI in the accounts of the company. Bank has already made provisions amounting to Rs. 824.06 Crore, as per prescribed prudential norms,” the filing reads.

What is a Non-Performing Loan?

Non-Performing Loan AKA ‘NPL’ is a loan that is either subjected to late repayment or there is uncertainty about it being paid back in total to the bank by the borrower. The NPA reduces the profitability of a bank which it was supposed to generate through the interest on the given loan.

On similar lines, Punjab & Sindh Bank (another Public Sector Bank), just a month ago had reported a fraud by IL&FS in which the dues were over 148 crore rupees. The bank on February 15 reported to the central bank stating that it had declared the IL&FS’s bad assets as a fraud account.

“It is informed that an NPA account, viz IL&FS Tamil Nadu Power Company Ltd with outstanding dues of Rs 148.86 crore has been declared as fraud and reported to RBI today as per regulatory requirement,” Punjab & Sindh Bank had said in a regulatory filing. PSB has made the provisions of over 59.54 crore rupees, prescribed by the prudential norms.

IL&FS Tamil Nadu Power which is a special purpose vehicle (SPV) is promoted by IL&FS Energy Development Company which itself is a subsidiary of Infrastructure Leasing & Financial Services (IL&FS).

As per Care Ratings released in June 2021, IL&FS Tamil Nadu Power is supposed to pay back 5,584.93 crore rupees to banks.

What is ‘Provision’ in banking?

Making provision by banks means the recognition of a loss from the loan that a bank has given to its client. In order to absorb the losses, banks utilize their capital and take the loss. The provision is the amount that the bank may not be able to collect back from the client. Important to note that a bank always covers the net loss using provisions.