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Financial frauds on the rise

In the financial year 2018-19, unofficial 6,800 cases of bank fraud related to Rs 71,500 crore have been reported. Last year, in the same period i.e. 2017-18, around 5,916 cases of fraud amounting to Rs. 41,167.03 crore were reported to the central bank. The Reserve Bank (RBI) has divulged this information through a media release statement.

The RBI shared the details in response to a RTI enquiry of a PTI Journalist. The RBI said that the scheduled commercial banks and financial institutions had registered a whopping 6,801 bank fraud cases involving a sum of 71,542.93 crore rupees. The central bank said that in the last 11 financial years, the banks had registered 53,334 fraud cases.

During the financial year 2008-09, a total of 4,372 cases of Rs. 1,860.09 crore were registered. In 2009-10, a total of 4,669 cases of fraud related to Rs 1,999.94 crore were reported. In 2010-11 and 2011-12, 4,534 and 4,093 cases were registered against the fraud of Rs 3,815.76 crore and Rs 4,501.15 crore, respectively.

Such cases of financial frauds should be mandatorily reported to Law Enforcement Agencies, for getting the culprits arrested. The central bank also added that, "the cases of informed fraud should be filed before the law enforcement agencies by the banks as a criminal complaint. However, the magnitude or the course of action taken against such cases cannot be determined as information related to it is not available immediately.

CVC report prepared This financial fraud data holds a lot of relevance because important because major public & private sector lendershave been struggling with the cases of fraud related to fugitives such as Neerav Modi and Vijay Mallya for the past few years. In view of the large number of frauds being reported, the anti-corruption watchdog, Central Vigilance Commission (CVC) got into the act of doing a thorough analysis and prepared a report involving 100 big frauds.

The investigation was concentrated on the modus operandi, amount involved, type of lending (consortium or individual), anomalies observed, loopholes that facilitated perpetration of the fraud concerned and the systemic improvement required to plug the gaps in the system and procedures.

The frauds have been were categorized and scrutinized for 13 sectors, including gem and jewelry, manufacturing and industry, agriculture, media, aviation, service and project, discounting of cheques, trading, information technology, export business, fixed deposits, demand loan and letter of comfort.

The measures suggested by the CVC include strengthening standard operating procedures (SOPs) and the monitoring system, among others.

Top officials of two prominent public sector banks, former CMD of IDBI Bank, former Aircel promoter C Sivasankaran, his son and companies controlled by him were nabbed by the CBI in 2018 for their connection with a Rs 600-crore loan fraud in the IDBI.

The investigative agency named 15 bank officials who worked at senior levels at the IDBI in 2010 and 2014 when loans were sanctioned to companies controlled by Sivasankaran, in its FIR registered on a complaint from the CVC.

Managing Director and CEO of Indian Bank, Kishor Kharat (who was then MD and CEO of IDBI Bank) and his counterpart in Syndicate Bank, Melwyn Rego (then deputy managing director in IDBI Bank) along with then Chairman & Managing Director of IDBI Bank M S Raghavan, have been named in the latest FIR filed by the CBI.

Central agencies like the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) are also probing big-ticket bank fraud cases. 

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Sunday, 15 September 2019

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