A total of 222 bank frauds involving ₹27,000 crore, were reported by the Central Bureau of Investigation in 2018-19 according to the annual report of the Central Economic Intelligence Bureau (CEIB) – an intelligence wing and think-tank of the finance ministry.
The number highlights the problem facing Indian banks already tacking the issue of looming bad debt and wilful defaulters. Banks themselves flagged the cases of fraud and default.
“Agencies have asked to initiate prompt action to recover the money and prosecute those responsible,” a senior finance ministry official said on condition of anonymity.
On Tuesday, the CBI carried out countrywide raids on 16 companies for bank fraud and defaults that cost the exchequer about ₹1139 crore. The agency registered as many as 17 separate cases. A Gujarat-based Diamond trading company that owes a consortium banks about ₹7000 crore was among companies whose premises were searched.
According to CEIB the top ten banks in terms of money lost to frauds and default are: India’s largest state-owned lender State Bank of India (SBI), the Punjab National Bank (PNB) which has been roiled by a high-profile fraud case involving fugitive diamond merchant Nirav Modi; the Central Bank of India, United Commercial Bank and, ICICI Bank, the country’s largest private lender. CBI is investigating the last’s former CEO Chanda Kochhar for allegedly sanctioning loans to the Videocon Group in return for which the latter invested in a company promnoted by her spouse.
In a separate 73-page report titled “Timely detection of bank frauds” submitted to the government, CEIB listed 11 prime reasons for recurring banking frauds. These included banks not monitoring SWIFT – a global network that gives details of fund transfer among banks; lack of due-diligence by banks; and failure of credit appraisal committees of banks.”
{{/usCountry}}In a separate 73-page report titled “Timely detection of bank frauds” submitted to the government, CEIB listed 11 prime reasons for recurring banking frauds. These included banks not monitoring SWIFT – a global network that gives details of fund transfer among banks; lack of due-diligence by banks; and failure of credit appraisal committees of banks.”
{{/usCountry}}CEIB has suggested “systemic changes” to address the situation including a dedicated online platform for borrowers, relating to invoices raised, revenue realized, payments made and repayment of loans received so that the problem of manipulation of receivables is addressed.
Chandrajit Banerjee, director general, Confederation of Indian Industry (CII), said, “During the crisis of 2008-09 it was the real sector which was putting pressure on the financial sector. In the last one year, we are seeing similar transmission of risk from financial sector to real sector. It is time for all regulators to ensure that no part of financial sector is allowed to slip.”