$1.7 billion fraud at a single branch uncovered in Indian bank.

Punjab National Bank (PNB), India's second-largest government-owned lender, has discovered a fraud worth $1.77 billion at one of its branches in Mumbai. This amount is nearly a third of the bank's market value of Rs36,444.45 crore (as on Feb. 14), and close to 50 times its net profit in the October-December 2017 quarter.

This may just be the tip of the iceberg, as the impact of the crime is likely to spill over to other banks, too.

"The bank has detected some fraudulent and unauthorised transactions (messages) in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions, other banks appear to have advanced money to these customers abroad," PNB said in a notice sent to the stock exchanges on Feb. 14. The matter has been referred to law enforcement agencies.

As the news broke, the PNB stock took a beating and was down close to 7% at 12:15pm on Wednesday.

The New Delhi-based bank is yet to clarify on the issue. "The quantum is really big but we need to understand what sort of provision the bank will take. Details on the nature of fraud, how it will be treated, and the likely effect on the profit and loss account are still awaited," said Siddharth Purohit, a research analyst at domestic brokerage SMC Institutional Equities.

There are also significant concerns over the impact on other lenders, especially public sector banks already under pressure due to rising bad loans and low credit growth. "The amount declared by PNB is unbelievably large and there must be other banks as well where the fraudsters were doing transaction, as PNB has stated," said Asutosh Kumar Mishra, a banking analyst with Reliance Securities. "We have to wait and watch to see who all have been defrauded."

PNB was under scrutiny earlier this month, too, after the Central Bureau of Investigation (CBI) booked billionaire diamond merchant Nirav Modi, his business partner, and his family members for allegedly cheating the bank of over Rs280 crore in 2017. The report filed by the lender with the CBI also named two employees for colluding with Modi.

For now, it is unclear if the fraud reported on Feb. 14 is linked to Modi's case.