India's banks rattled by $1.8 billion Punjab National Bank fraud

India's booming auto industry
India's booming auto industry

One of India's biggest banks rattled investors Wednesday by announcing the discovery of $1.8 billion of fraudulent activity at one of its branches.

Punjab National Bank's stock sank nearly 10% Wednesday after the company said it "detected some fraudulent and unauthorized transactions" at a branch in Mumbai. The bank said in a statement that "a few select account holders" appear to have been involved.

Other Indian financial giants may also be affected by the fraud.

"Based on these transactions, other banks appear to have advanced money to these customers abroad," Punjab National Bank added.

Related: Why India's $32 billion bank bailout isn't enough

A spokesman for the bank declined to provide further information but said it would release a more detailed statement shortly.

Investors also dumped shares in other big players in India's financial system, which has been burdened with bad loans and needed a $32 billion bailout last year.

State Bank of India, the country's biggest lender, dropped more than 4%, while Bank of India was down more than 8% by Wednesday afternoon. The banks did not immediately respond to requests for comment.

The country's central bank, the Reserve Bank of India, declined to comment.

Police in Mumbai told CNNMoney that the case had been escalated to India's Central Bureau of Investigation (CBI), but did not provide further details.

The CBI did not respond to requests for comment.

-- Srishti Jaswal contributed to this report

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