$1.8 Billion in India Bank Fraud Raises Fears of Ripple Effects<br />NEW DELHI — One of India’s largest commercial lenders said on Wednesday<br />that it had detected fraudulent transactions worth $1.77 billion at just one of its branches, raising concerns about the possible impact across the banking sector at a time when the country is struggling to meet its economic growth targets.<br />Fears that India’s wider banking sector may be exposed to Punjab National Bank’s troubles left<br />investors panicked, driving shares in several other lenders to close lower on Wednesday, too.<br />“They have to bite the bullet and take on bureaucrats<br />and the bank employee unions and actually fix banks’ governance or India will struggle to maintain its growth projections.”<br />Mr. Sharma, like other analysts, says the government in New Delhi will need to privatize a number of lenders or shut them down.<br />“This is a reminder that the bank recapitalization scheme<br />that the government outlined months ago doesn’t solve the problems in Indian banking,” said Mihir Sharma, a prominent Indian economist and columnist.<br />The disclosure comes months after India’s government injected $32 billion into the sector<br />to deal with bad loans, which by some estimates could be as high as $150 billion.<br />The scandal at Punjab National Bank, a state-controlled lender, risks drying up the very loans<br />that are needed for the country’s small and medium-size businesses to help steer the government’s ambitious growth programs.
