By Abhay Ray 
Introduction
State-owned Bank of India (BOI) on Friday reported a fraud of ₹226.84 crore by Odisha-based Gupta Power Infrastructure Ltd to the Reserve Bank. The bank has informed that Non Performing Asset (NPA) of Gupta Power Infrastructure Ltd has been declared as fraud, BoI said in a regulatory filing. Against the outstanding amount of ₹226.84 crore, the bank has made provisions of ₹212.62 crore in case of Gupta Power Infrastructure Ltd, it said. For the third quarter ended December 2024, BoI posted a 35 per cent jump in net profit to ₹2,517 crore against ₹1,870 crore in the year-ago period.
Gupta Power Infrastructure Ltd. Fraud Details
Gupta Power Infrastructure Ltd, based in Odisha, has been implicated in a ₹226.84 crore loan fraud reported by Bank of India. The fraud involves the company’s failure to repay loans, which led to the bank classifying the outstanding amount as a non-performing asset (NPA). This is part of a broader issue concerning loan defaults by the company, which had previously been flagged by other financial institutions as well. The bank has made provisions of ₹212.62 crore to account for the defaulted loan. In addition, this case follows a similar fraud declaration by Punjab National Bank (PNB), further highlighting the financial distress surrounding Gupta Power Infrastructure Ltd.
PNB flags ₹ 270.57 crore Fraud
Punjab National Bank also reported a fraud of ₹270.57 crore by Gupta Power Infrastructure Ltd to the Reserve Bank. Borrowal fraud of ₹270.57 crore has been reported to the Reserve Bank of India (RBI) in the non-performing asset (NPA) account of Gupta Power Infrastructure Ltd, PNB said in a regulatory filing. The loan was given by Station Square branch of the bank in Bhubaneswar, it said. The bank has already made provisions amounting to ₹270.57 crore, according to prescribed prudential norms. For the December quarter, PNB posted more than two-fold jump in net profit to ₹4,508 crore as against ₹2,223 crore in the same quarter a year ago. The company’s total income increased to ₹34,752 crore from ₹29,962 crore in the same period a year ago, PNB said in a regulatory filing. Interest income also rose to ₹31,340 crore from ₹27,288 crore in the same quarter a year ago. On the asset quality front, the bank’s gross non-performing assets ratio moderated to 4.09 per cent from 6.24 per cent a year ago.
Bank of India’s Financial Performance
Bank of India (BOI) showed strong financial performance for the third quarter of FY 2024.The bank’s net profit surged by 35%, reaching ₹2,517 crore, up from ₹1,870 crore in the same period the previous year. The bank’s total income rose to ₹19,957 crore, an increase from ₹16,411 crore in Q3 2023. The interest income of the bank rose to ₹18,210 crore against ₹ 15,218 crore in the third quarter of the preceding year. Its net interest income (NII) increased to ₹ 6,070 crore against ₹5,463 crore for Q3 FY24. This growth in profitability and income reflects the bank’s solid operational performance, even as it navigates the challenges posed by the loan fraud cases.
Impact of Loan Defaults and Fraud on the Banking Sector
Loan defaults and frauds like the one reported by Bank of India (₹226.84 crore involving Gupta Power Infrastructure Ltd) continue to pose significant risks to the stability and health of the banking sector in India. These issues lead to higher provisions and write-offs, affecting the profitability of banks and reducing their ability to lend freely. Such frauds erode public confidence in the financial system and increase operational costs as banks invest more in risk management, due diligence, and compliance measures. Moreover, repeated instances of defaults and frauds can lead to stricter regulatory scrutiny, potentially tightening lending practices and further impacting the availability of credit in the economy. The cumulative effect of these incidents underscores the need for banks to enhance their internal controls, risk assessment frameworks, and fraud detection systems to mitigate future risks.
Conclusion
The ₹226.84 crore loan fraud reported by Bank of India involving Gupta Power Infrastructure Ltd highlights the ongoing challenges faced by the Indian banking sector in managing risks related to loan defaults and fraud. Bank of India has demonstrated strong financial performance, reflecting its operational strength. However, this incident serves as a reminder of the pressing need for enhanced risk management and compliance measures across the sector. Strengthening internal controls, improving fraud detection systems, and ensuring rigorous due diligence are crucial for safeguarding the financial system against future risks and maintaining the stability of the banking industry.
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