Punjab and Sind Bank (PSB) on Tuesday said it has declared the accounts of Srei Equipment Finance and Srei Infrastructure Finance with cumulative dues of Rs 1,234.34 crore as fraud and has reported the same to the Reserve Bank of India.

“In terms of Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015 and having regard to the bank’s policy on determination and disclosures of material events, it is informed that the NPA Accounts, viz. M/s Srei Infrastructure Finance Limited (SIFL) with outstanding dues of Rs 510.16 crore and M/s Srei Equipment Finance Limited (SEFL) with outstanding dues of Rs 724.18 crore have been declared as fraud and reported to the RBI,” the bank said in a statement to the stock exchange.

“Further, the accounts have been fully provided for as per prescribed prudential norms,” the statement added.

Srei sources said the decision of the bank could be based on the forensic report of the NBFC accounts by KPMG.

“It is unfortunate that a PSU has taken such a step, even when the KPMG report, on which the decision has seemingly been based, is still sub-judice. Necessary legal steps will be initiated in this regard,” sources said adding that the company had offered full payment with interest which was earlier refused by the lenders.

The erstwhile promoters of Srei have moved the NCLT with an appeal to set aside the audit process conducted by KPMG in light of the initiation of the insolvency process and restrain the lenders from publishing any audit report to the Central Repository of Information on Large Credits.

KPMG was appointed for the audit in April 2021 and was supposed to submit its report by June 2021 according to the RBI master direction on frauds of 2016-17.

In the meantime, the company was placed under the corporate insolvency resolution process in October 2021 and the resolution professional appointed by the Reserve Bank of India selected BDO India LLP for carrying out the transaction audit of the corporate debtor.

Srei founder Hemant Kanoria has written a letter to RBI governor Shaktikanta Das that any action based on the “improper” report may hamper the ongoing resolution process being undertaken by the administrator appointed by RBI under IBC.