Public sector banks have cumulatively lost a massive sum of Rs. 22,743 crore due to cheating and forgery in the last three years alone, HT has found through a right to information RTI) reply.
Indian Overseas Bank is the worst hit with a loss of Rs. 3,200 cores as against State Bank of India (SBI) which lost Rs. 2,712 crore. Between April 2010 and September 2013, the number of bank fraud cases has shown a slight decrease yearly but the amount of money lost has been increasing year on year.
The number of fraud cases, for instance, came down to 2996 in April 2012 to March 13, from 3748 in April 2010 to March 2011, but the amount shot up to Rs. 10179.42 crore from Rs. 3275 crore.
The Reserve bank of India (RBI) issued detailed instructions to banks on July 2, 2012 containing details related to how banks should examine fraud cases and report them to CBI, the police and the special fraud investigation office (SFIO). Even after this, the money lost in fraud cases have increased.
Interestingly, by way of comparison, Indian Overseas Bank lost more to fraud than it earned in profits. It registered a net profit of 2848 crore between 2010 and 2013 but leaked Rs. 3200 crore for the same period.
For SBI, the blow was cushioned. It registered a profit of Rs. 39692 crore between April 2010 and September 2013. In the corresponding period, the bank lost Rs. 2712 crores to fraud.
As per the documents available, more than 6000 employees of different banks are under the scanner for involvement in these cases. These are not just lower or mid-level employees, but in some cases, CMDs and directors of different banks. For Instance, in May 2013, a CBI special judge convicted M Gopalakrishnan, former Chairman-cum-Managing Director of Indian Bank, Chennai as he had sanctioned credit facilities of huge amounts to a company without sufficient securities and also by surpassing the rules of the bank.
Analysis of cases investigated by the CBI reveal that bankers sometimes exceed their discretionary powers and give loans to unscrupulous borrowers on fake or forged documents. After getting the money, the borrower escapes causing huge loses to the banks.
While loans on forged documents are the main component of these losses, there are other reasons too. Ashvin Parekh, National Leader, Global financial services, EY, said, “The increase in alternate channels including internet banking and even use of ATMs which has reduced as human interface with the customer and banks has led to an increase in fraudulent activities.”
“We have already taken corrective measures to ensure preventive vigilance. Policy tightening is also being undertaken,” said M Narendra, Chairman and Managing Director, Indian Overseas Bank. He also added that adequate training is being provided to the staff and the bank is ‘fine-tuning operations aspects’. Canara Bank, UCO Bank and United Bank did not respond despite numerous reminders.
A senior official at SBI said the amount is a cumulative one. “In the last one year several stringent measures of checks and balances have been put in place and in the last one year the number of cases has substantially come down,” the official, who did not wish to be identified, said.