PSU Bank stocks tank; Andhra Bank plunges to 14-year low on news about Rs 5000 crore fraud

Last Updated: Mon, Mar 12, 2018 12:38 hrs
Andhra bank

After Punjab National Bank came out with a revealation recently that a big scam had taken place in the bank with a couple of officials of the bank favouring the business houses of Nirav Modi and Mehul Choksi by issuing fraudulent letters of undertaking, it is now Andhra Bank, another state-run bank, which has come out with an announcement that the Enforcement Directorate has filed a chargesheet against a former director of the bank in connection with an alleged fraud.

The sell-off at the Andhra Bank counter on the bourses this morning pushed the stock to a fourteen-year low. On BSE, the stock tanked to Rs   and on the National Stock Exchange, it declined to 31.95.

At Rs 33.10, the stock is now down as much as 14% from its previous closing price. On NSE, the Andhra Bank counter has clocked a volume of about 25.3 million shares so far in the session.

On BSE, more than 2.3 million shares have changed hands so far at the Andhra Bank counter today, as compared to average daily volume of about 3.67 lakh shares.

The impact of the news about another big scam in the banking industry has triggered another round of heavy selling in the PSU banking space. On NSE, the Nifty PSU Bank index is down nearly 3% at 2773.75, a 52-week low.

All the stocks in the Nifty PSU Bank index are down in negative territory. State Bank of India, which is down by a little over 2%, has suffered the least damage. Indian Bank, Bank of Baroda, PNB and Canara Bank are down 2.2% - 4%. Syndicate Bank, Allahabad Bank, Bank of India, Union Bank of India and Oriental Bank of Commerce are down 4.5% - 8%, while IDBI Bank is down by about 11%.

According to reports, the ED has failed a charge sheet against Anup Prakash Garg in connection with a Rs 5000 crore bank fraud involving Sterling Biotech Limited.

In the charge sheet, the directorate has claimed that Sandesaras, the promoters of Sterling Biotech, paid more than Rs 1.5 crore to Garg as bribe for facilitating bank credit and other transactions. It may be recalled that Garg was arrested in January this year and is currently in custody.

It is reported that a consortium of banks, led by Andhra Bank, sanctioned loans worth over Rs 5000 crore to Sterling Biotech Limited and its directors and the entire loan amount has turned into a non-performing asset. The SBL group and its directors are reported to have laundered this money abroad through several shell companies using bogus export/import invoices.

The stock exchanges have sought clarification from Andhra Bank with reference to the news about the scam and a response from the bank is awaited.

Meanwhile, shares of Sterling Biotech Limited are down 4.8% at Rs 2.76 on BSE. On NSE, the stock is down 3.5% at Rs 2.75. The stock's 52-week high was Rs 6.80, recorded on 12 April 2017.

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