New Delhi: Public sector lender Punjab National Bank (PNB) has detected a fraud of more than Rs 3,800 crore by Bhushan Power & Steel Ltd (BPSL) and has reported it to the Reserve Bank of India (RBI).

PNB said Bhushan Power & Steel Ltd misappropriated bank funds and manipulated its books of accounts to raise funds from consortium lender banks.

"On the basis of forensic audit investigation findings and CBI filing FIR, on suo moto basis, against the company and its directors, alleging diversion of funds from banking system, a fraud of Rs 3,805.15 crore is being reported by bank to RBI," Punjab National Bank (PNB) said in a regulatory filing.

"It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at NCLT which is in advance stage and the bank expects good recovery in the account," PNB added.

PNB said the bank has already made provisions amounting to Rs 1,932.47 crore, as per prescribed prudential norms, for the BPSL account.

PNB said its domestic exposure to Bhushan Power & Steel Ltd (BPSL) stood at Rs 3,191.51 crore and overseas exposure of $49.71 million (approx Rs 345.74 crore) at Dubai branch and $38.51 million (approx Rs.267.90 crore) at Hong Kong branch.

The state-run bank has reported a new fraud at a time when it is recovering from a major financial embezzlement of around $2 billion (around Rs 13,000 crore) by diamond merchant Nirav Modi that was reported in February 2018. Modi allegedly acquired fraudulent letters of undertaking (LoUs) from one of PNB's branches for overseas credit from other Indian lenders and is being probed by CBI and Enforcement Directorate among other agencies.