In response to an RTI filing, Reserve Bank of India revealed over 50,000 frauds worth ₹ 2.05 trillion hit Indian banks in the last 11 years.
- According to RBI Data, Indian banks were hit with 53,334 cases of frauds between 2008-09 and 2018-19.
- The total amount of money that is in limbo because of financial frauds in these 11 years is a staggering ₹ 2.05 lakh crore.
- Institutions like ICICI Bank, State Bank of India (SBI) and HDFC Bank reported highest number of cases.
India is regularly hit with economic frauds and scams with high-profile connections. Some get caught and most frauds eventually come out in the open. However, a number of fraudsters are successful in escaping justice.
Banking frauds have become a trend of sorts in the country, where amalgamation of high-profile businessmen, auditors, top brass bank executives and dishonest politicians in some cases, successful dupe the country’s banking system and in turn the economy of crores of rupees.
A report revealed last year that scheduled commercial banks and select financial institutions reported at least 6,801 cases of fraud amounting to ₹71,542.93 crore in the bygone fiscal year.
Fresh data from RBI in response to an RTI reveals frauds worth Rs. 2.05 Lakh Crore hit Indian Banks between 2008-9 and 2017-18.
What the RBI Data revealed?
RBI’s report states that ICICI Bank, SBI and HDFC lead in terms of total number of cases reported. But when looking at the total amount of fraud, it is government banks Punjab National Bank (PNB), SBI and Bank of Baroda (BoB) which were more vulnerable to large frauds that private sector banks.
ICICI Bank reported a total of 6,811 cases in the last 11 fiscal years which amounted to loss worth ₹5,033.81 crore. State Bank of India (SBI) came in close second with 6,793 fraud cases involving ₹23,734.74 crore. HDFC Bank, which hasn’t been associated to any of the frauds that made it big in the news is in third with 2,497 recorded cases for ₹1,200.79 crore.
Other banks include Bank of Baroda (2,160 cases worth ₹12,962.96 crore, Punjab National Bank (2,047 cases worth ₹28,700.74 crore), and Axis Bank (1,944 cases worth ₹5,301.69 crore). The top 10 line up is completed by Bank of India (1,872 cases worth ₹12,358.2 crore) Syndicate Bank (1,783 cases worth ₹5830.85 crore), Central Bank of India (1,613 cases worth ₹9041.98 crore) and IDBI Bank (1,264 cases worth ₹5978.96 crore.
Foreign Banks also reported frauds
The RBI data revealed frauds happened at foreign banks operational in India too. The number of cases was led by American Express Banking Corporation with 1,862 cases worth ₹86.21 crore, but Standard Chartered Bank took the title for amount of money defrauded from a foreign bank (1,263 cases worth ₹1221.41 crore).
Other foreign banks that saw incidents include Citi Bank (1,764 cases worth ₹578.09 crore), Hongkong and Shanghai Banking Corporation or HSBC (1,173 frauds worth ₹312.1 crore and The Royal Bank of Scotland (RBS) with 216 frauds involving ₹12.69 crore.
Numbers that grew consistently each year
The report also revealed that these numbers grew significantly and with a consistent upward trajectory in these 11 years.
While total fraud cases reported stood at 4,372 cases amounting to ₹1,860.09 crore during 2008-09, the number of frauds in 2017-18 stood at 5,916 involving ₹41,167.03 crore.
This reveals that although the number of frauds reported also grew, the average amount of frauds grew exponentially in comparison. In fact, the amount Indian Banks were defrauded of in the last three years during the NDA government, adds to a staggering 83,798 crores or 29 percent of the total defrauded money in the last 11 years.
Number of frauds saw a sharp rise at 72 percent in the 2018.
The uphill trajectory resulted from increase in cases of where the amount was more than ₹ 50 crore, i.e. larger value cases.
As per the RBI data, such cases were mostly related to foreign exchange transactions, diversion of funds through associated entities or shell companies and more recently due to cyber frauds.
PSBs more likely to be defrauded
The report revealed that 93% of frauds above ₹ 1,00,000 involved Public Sector Banks (PSBs) like PNB and SBI scams that have come up.
The infamous Nirav Modi and Mehul Choksi scam was reported in the same year.
Although PSBs do not have significantly bigger number of cases reported; the frauds at these banks amount for significantly higher value, amounting to over 90% of total frauds.
High value frauds have a higher possibility of occurring at a PSB. This is an alarming revelation are the Public Sector Banks are noted to have greater accountability that private banks, as they rely on public money for their operations.
A dishonest triangle
Bank executives often get kickbacks which are sent to overseas accounts of relatives.
Premature retirements and exits of directors is a recently common happening in India. And add to it that the biggest blows come to PSBs which are funded by public money puts the trust in the banking system in a sticky spot.
While bank officials and rich businessmen sometimes get caught in such cases, many of these are never revealed or revealed too late because the auditors ensure that foul play is safely hidden between the lines in company books.
Recently, scams like IL&FS where new developments are being released everyday has a number of such high-ranking directors in radar, as well as auditors like Deloitte and an arm of KPMG in the loop for alleged malpractices.
Cutting corners in Indian banking system
High-profile frauds like PNB scam involving diamantaire Nirav Modi, and Mehul Choksi; ICICI-Videocon Fraud, IL&FS fiasco which is still unearthing, Jet Airways NPA for SBI-led consortium, Vijay Mallya, Jatin Mehta, the Sandesara brothers – the list goes on.
The biggest issue is a flawed structure where top brass isn’t answerable till such a wrong doing comes out in the open. Several of these frauds involve high ranking officers aiding ruthless businessmen in robbing the public of its money in the banks – Chanda Kochhar of ICICI who was India’s most popular banker at one time is perhaps the biggest example.
Financial frauds are not a new thing. But with technological disruption bringing more transparency to the system, they are more probable to being caught. Whistle blowers such as activist investors regular find murky numbers and shades of misdoings at banks, but the limitations of investigation bodies like CBI and Enforcement Directorate (ED) gives fuel to such misdemeanours.
While the GDP shows no signs of betterment and the common man reels under the pressure of unrewarding economy, the disparity, list of offenders and fugitives continues to grow.
- The amount of frauds in the last three years adds to 83,798 crores or over 29 percent of the total defrauded money in the last 11 years.
- Although PSBs do not have bigger number of reported cases; the high value frauds take place at these banks, amounting to over 90% of total frauds.
- As per RBI, fraud cases mostly related to foreign exchange transactions, diversion of funds through associated entities or shell companies and more recently due to cyber frauds.
By: Chitresh Sehgal, Senior Editor, Dkoding Media