Highlights PNB shares have plummeted nearly 40% since fraud was revealed

RBI recently barred banks from issuing LoUs with immediate effect

RBI move followed revelations of biggest fraud in India's banking history

Punjab National Bank (PNB) has uncovered more suspected credit guarantee fraud within the Mumbai branch at the centre of a similar alleged scam worth over $2 billion, according to a complaint filed with the Central Bureau of Investigation (CBI). The alleged embezzlement of around Rs 9.1 crore ($1.40 million) involved executives of a little known company called Chandri Paper and Allied Products, according to the complaint filed by PNB with the CBI. The newly uncovered scam raises fresh doubts about whether more such cases involving fraudulent guarantees lurk on the books of PNB, the second biggest state-run lender, or other government-owned Indian banks.The Reserve Bank of India (RBI) early this week barred banks from issuing the letters of undertaking (LoUs) the credit guarantee instrument at the heart of the fraud - with immediate effect.That move followed revelations of what has been dubbed the biggest fraud in India's banking history, in which two jewellery groups allegedly colluded with bank employees to get fraudulent letters of undertaking which helped them raise credit of about $2 billion from overseas branches of Indian banks.In the latest case, PNB told the CBI two officials at its Brady House branch in Mumbai "entered into a criminal conspiracy" with the directors of Chandri Paper in April 2017 to fraudulently issue two letters of undertaking for the company to raise the money.According to the complaint, the same set of bank officials were allegedly involved in both cases.

© Thomson Reuters 2018

A PNB spokesman had no immediate comment. Chandri Paper could not immediately be reached for comment.The bank's shares, which have plummeted nearly 40 percent since the first fraud was revealed, were little changed in morning trading on the Bombay Stock Exchange (BSE) on Thursday.