- Indian Banks Face Crippling Credit Crunch As PNB Scandal Worsens
by Tyler Durden, https://www.zerohedge.com/
The biggest financial fraud in India’s history just got bigger.
On Monday, Punjab National Bank disclosed that a fraud previously believed to be $1.7 billion had swollen to $2 billion as the true extent of the fraud is still coming into focus.
But the impact that this now-$2 billion fraud has had on the shares of PNB and other state-run Indian banks is having a wide-ranging impact across the country’s financial system, according to Bloomberg.
Foreign banks, worried about the systemic lapses that the scandal has exposed, have become unwilling to lend money to smaller Indian firms – causing massive disruptions in trade finance. All of this pressure has hammered the Indian rupee, which is on track for its first monthly drop since September. This is largely because India’s economy, like the US, runs a trade deficit, and depends on capital inflows to function.