In August 2014, Syndicate financial institution’s then chairman and handling director S.okay. Jainchanged into arrested along side heads of some corporations for approving loans in exchange for bribes.photograph: Pradeep Gaur/Mint
Mumbai: Bengaluru-based Syndicate bank recently fell sufferer to a massive-scale fraud throughout threeof its branches in the Jaipur location, in which a handful of businessmen and others, with the assist of thebank’s officers, controlled to swindle the financial institution of over Rs.900 crore over 4 years. Theborrowers used faux files, along with fake or non-existent letters of credit, coverage rules and cheques. Syndicate financial institution needed to make provisions worth almost Rs.883 crore inside the January-March length because of the fraud, main to a loss of over Rs.2,000 crore in the March quarter.
This isn’t the first time that an Indian bank has been conned by fraudsters. within the last few years, a number of instances have come to light, elevating the query—how robust are the tests and balanceswithin the Indian system? right here are some of the greater recent times of fraud that have come tolight.
1) foreign exchange rip-off: In October 2015, the vital Bureau of investigation (CBI) performed raidsthroughout financial institution branches including those of financial institution of Baroda and HDFCbank as a part of a forex scandal, wherein bank personnel had liaised with certain human beings to illegally transfer price range to numerous debts in Hong Kong and the UAE, flouting forex norms set with the aid of the Reserve financial institution of India (RBI). bank of Baroda’s Ashok Vihar department in New Delhi became relevant to the whole racket, wherein consistent with the CBI, over Rs.6,000 crore well worth of finances were transferred illegally.
2) fixed deposit rip-off: In August 2014, the financial Offences Wing (EOW) of the Mumbai police filed ninefirst statistics reviews (FIRs) against several bank officers for colluding with outsiders to perpetrate a hard and fast deposit fraud worth Rs.seven hundred crore. officials from Dena bank, Oriental bank ofcommerce, Dhanalaxmi bank, UCO bank, Vijaya bank and bank of India were stated to be involved in thescam. faux receipts from fixed deposits have been used to create more than one money owed to avail of overdraft facilities on these fixed deposits, which had been then transferred to the beneficiaries who took the cash out of the banking machine.
three) Bribe-for-mortgage rip-off: In August 2014, Syndicate financial institution have become the centre of interest for every other big rip-off, in which its then chairman and dealing with director S.k. Jainchanged into arrested at the side of heads of a few companies for approving loans in trade for bribes. The case led to a discussion around the Rs.forty,000 crore really worth of debt of Bhushan metal Ltd, whichbecome additionally named in the case. Jain in the end left the financial institution and theinvestigation remains on.
4) Deccan Chronicle case: In July 2013, promoters of Deccan Chronicle Holdings Ltd (DCHL) had beensubjected to research by using the CBI, as they were said to have perpetrated a fraud worth Rs.4,000 crore. The case, filed by Canara financial institution, stated that the promoters of the publishing companyhad pledged the identical safety with a couple of banks to avail of loans. The enterprise became laden bydebt after enlargement into unrelated groups, along with an aviation challenge, ebook keep chain Odyssey and the Indian gold standard League franchise Deccan Chargers, which became terminated in 2013 after it did not pay the franchise charge of Rs.a hundred crore. The RBI, in July 2014, fined 12 non-public and public sector banks a sum of Rs.1.5 crore for his or her dealing with DCHL.
five) Cobrapost scandal: In 2013, information portal Cobrapost blew the lid off what it referred to as amoney laundering racket across some of the us of a’s biggest banks. based on a sting operation, thewebsite uncovered violations of some of fundamental banking regulations, which includes know-your-purchaser (KYC) norms, anti-cash laundering (AML) policies and the foreign exchange control Act, 1999 (Fema). for the reason that these violations were unfold across almost all massive banks, the RBIchanged into forced to adopt a “thematic look at” which showed the transgressions and resulted in theimposition of Rs.50 crore great on 22 banks. The banking regulator, in advance this year, additionallyissued hints that banks need to comply with to prevent and hit upon fraud.
So what’s the regulator doing approximately it? In might also 2015, for the first time, the RBI put invicinity a framework to address frauds. As part of the framework, RBI added a idea known as crimsonFlagged Account (RFA), which might be bills wherein the suspicion of fraudulent hobby is thrown up viathe presence of one or more early warning indicators.
The critical financial institution listed forty five early caution indicators, which want to be monitored viaa financial institution. The list includes unpaid loans to multiple banks, bouncing of cheques, raids by tax or excise responsibility officers, and common trade inside the scope of mission to be undertaken. high–fee digital bills to unrelated parties has additionally been flagged off as a warning sign. The RBI alsoasked banks to sensitize their employees to the chance of fraud and detect early caution signals. Suchsignals should be promptly mentioned to the fraud monitoring institution or every other groupconstituted by means of the bank for the cause at once, the important financial institution stated in itstips. To make certain that the exercising stays meaningful, such officers can be held chargeable fornon-reporting or delays in reporting, the RBI regulations say.
