May 6, 2018 / 6:33 PM / 7 months ago

Fraud-hit Indian lender PNB targets over 10 percent business growth in 2018/19

FILE PHOTO: The logo of Punjab National Bank (PNB) is seen on a branch office window in New Delhi, India, February 27, 2018. REUTERS/Saumya Khandelwal/File Photo

NEW DELHI (Reuters) - Fraud-hit Indian lender Punjab National Bank (PNB) said on Sunday it aimed to expand its total business 10.8 percent to 12 trillion rupees ($180 billion) in the year to March 2019 and outlined steps to prevent more such frauds.

The second-largest state-run bank in February disclosed that two jewelry groups had defrauded it of more than $2 billion by raising credit from overseas branches of other Indian banks using illegal guarantees issued by rogue PNB staff at a Mumbai branch over several years.

While investigation continues into what has been called the biggest fraud in India’s banking history, PNB said after a board meeting that it had strengthened the process of underwriting credit to minimize the possibility of fraud.

The New Delhi-headquartered bank will split the process of credit underwriting into four divisions with different employees focused on sourcing, appraisal, process and underwriting, documentation and disbursement, and recovery, it said in a statement.

The bank will also rely more on an off-site monitoring mechanism and reduce its dependence on physical inspection and audit to identify risks, it added.

PNB has constituted a specialized stressed-assets management vertical for early identification of bad loans, the bank said.

India’s banks, already burdened by a 9.5 trillion-rupee soured-loan mountain as of last year, are staring at a further rise in bad loans after the central bank tightened rules earlier this year.

($1 = 66.8100 Indian rupees)

Reporting by Devidutta Tripathy and Nidhi Verma; Editing by Euan Rocha and Kevin Liffey

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