Biggest banking frauds in India

Biggest banking frauds in India

Have you tried to get a loan from bank?

If yes then you must be aware of strict rules they follow. For a common man to get a bank loan is a big exercise. You have to produce lot of documents, provide security and sign many terms.

Still big business houses are not only getting loans but cleaning banks.

I am going to write about biggest banking frauds happened in India and also about few funny reason quoted by banks.

For instance latest, bank fraud where few people took loan and misused to produce films.

What State Bank of India officers quoted, read it.

According to the bank, Chitra gained confidence of the branch officials and got acquainted with the loan sanction and disbursement norms. She submitted misleading facts and dubious documents to the authorities.

Through fraudulent methods, she accessed the operating system of the computers by hacking the user ID and password of the officials.

Read above text again. She got access to login id and password!!! My lord, did she offered something to bank officers, we have no doubt in that.

How one gets confidence of bank officers? Lord save bank.

If this is not funny at all, read about top banking frauds and laugh out loud.

Nirav Modi and Mehul Choksi Banking scam

This is the most recent scam got unearthed. You must have read about it in newspapers.

The scam amount is around $2 Billion (INR 12000 crore).

Funny part is banks are still not on reached on conclusion on amount involved in scam.

The targeted bank here is Punjab National Bank (PNB).

This scam was done using Letter of Undertakings.

Funny thing, again bank officers say Nirav Modi had access to software credentials and he could sanction loans himself !!!

I know India is a funny country.

Fraud was done by getting bank guarantee from Punjab National Bank. Normally Indian companies purchase products from foreign companies by entering into Letter of Undertaking/Credit where any Indian bank gives guarantee to pay money in case buyer does not pay.

Here PNB issued guarantee to foreign banks. Buyer (Nirav Modi) took loans from PNB to repay loan taken from PNB.

So now understand it with an example.

  1. First transaction of Rs. 100. by PNB.
  2. Nirav took loan of 110 to repay loan of earlier loan of 100.
  3. Nirav again took loan of 120 to repay loan of 110.
  4. Now keep repeating this cycle and amount reached to Rs. 12000 crore.

I wonder, how PNB kept sanctioning loan when not a single rupee came back and business was doing well.

Here one can clearly see that it is not possible to do fraud at this scale without involvement of bank officers. I have explained this in a simple manner, you can replace few words with LOU, MOU, bank guarantee, defaulters, sanction, credit limit etc. make it more fancy.

Harshad Mehta Bank and Stock Market scam

Another funny and intelligently executed scam which not only siphoned off banks but also brought down stock markets. The scam took place in 1992 when Indian stocks markets witnessed one of the worst fall downs.

The volume of scam is huge.

If we combine bank money and capitalization of stock markets, volume of scam will be huge.

Harshad Mehta kept money of banks with him and invested it in stock market. He kept buying stocks with this money and when matter went out of his hands, stock markets crashed and scam was unearthed.

Harshad Mehta printed fake stamp papers used to register stock/share transfers. He also used Banking receipts to get money and invest in stock market.

Satyam Scam by B. Ramalinga Raju

Satyam was one of the biggest IT outsourcing company of India.

Case of Satyam is very interesting for corporate governance issues.

Even auditors could not catch him. The fraud is very simple. Ramlingam Raju had shown fake sales and receipts were shown in form of Fixed Deposits with banks.

Auditors were given fake scanned and printed Fixed Deposit receipts.

I have listed top 3 financial scams in India that took place. However there are many scams that happened and many are still uncovered. In India, most of businesses are family owned businesses and as we all know here invention is not the factor but adjustments is the main factor for business differentiation.

The way Indian businesses are run, we cannot say how many listed companies are doing it right.


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