July 17, 2019 / 1:41 PM / 5 months ago

UPDATE 1-India's Punjab & Sind Bank flags fraud in Bhushan Power account

(Adds background, details on provisioning)

BENGALURU, July 17 (Reuters) - India’s Punjab & Sind Bank (PSB) said on Wednesday it has reported a 2.38 billion rupee ($34.58 million) fraud to the country’s central bank, relating to allegations of diversion of funds by the indebted Bhushan Power & Steel Ltd.

Earlier this month, Punjab National Bank (PNB) said it had reported a borrowing fraud of 38.05 billion rupees in Bhushan Power’s account to the Reserve Bank of India (RBI).

Both these banks are among a host of financial creditors who have claimed a collective 473.03 billion rupees from Bhushan Power, which the RBI referred to a bankruptcy court in 2017.

It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from the consortium of lenders, New-Delhi based PSB said in a statement here on Wednesday.

The case is currently at the country’s company law tribunal and the bank expects good recovery, it said.

State-owned PSB also said it has made provisions amounting to 1.89 billion rupees relating to its exposure to the Bhushan Power account. ($1 = 68.8280 Indian rupees) (Reporting by Derek Francis in Bengaluru; Editing by Rashmi Aich)

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