MUMBAI: India’s second largest lender Punjab National Bank on Thursday declared its Rs 3688 crore exposure to bankrupt mortgage lender Dewan Housing Finance Limited (DHFL) as fraud. The state-run lender said the company was being reported as a fraudulent account to the Reserve Bank of India.Under the rules set by the banking regulator 100% provisioning is required in fraudulent accounts spread across a period of four quarters. The lender has so far made a provision of Rs 1246 crore in the account.“A fraud of Rs.3688.58 crore is being reported by Bank to RBI in the accounts of DHFL, bank has already made provisions amounting to Rs.1246.58 Crore, as per prescribed prudential norms,” the government owned bank said in an exchange filing.State Bank of India and Union Bank of India have already red-flagged DHFL as fraud account. Private lender IndusInd Bank is also said to taken a similar action.DHFL which is the first financial entity being tried under India’s bankruptcy courts, has accumulated debt of over Rs 85,000 crore. Its erstwhile promoter Kapil Wadhawan is alleged to have been instrumental in laundering huge sums of money as part of an illegal deal with gangster Iqbal Mirchi.The Ministry of Corporate Affairs has also initiated Serious Fraud Investigation Office (SFIO) investigation into the affairs of the company. Further, Enforcement Directorate has also initiated investigation in connection with the loans given by the company to certain borrowers.A draft forensic report had revealed that the bankrupt lender had allegedly disbursed loans to inter-connected entities having a link with the promoters. Loans totalling more than Rs 24,594 crore were found to have been disbursed to 65 entities having negligible operations and without adequate documentation.