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The anatomy of India’s top 100 bank frauds, courtesy CVC

The report shows how fraudsters leveraged their creativity and resorted to all kinds of techniques to fool bank officials

New Delhi: The report prepared by the Central Vigilance Commission (CVC) that analysed India’s top 100 bank frauds is as much of a study of the brilliance of the human mind in engineering nefarious activities as it is a detailed dissection of the top bank frauds. It shows how fraudsters have resorted to all kinds of techniques, from creating fictional characters to hiring Chartered Accountants to access the core baking system (CBS) to concocting false invoices, to pull off the act.

While preparing the report, the CVC focused on the modus operandi, the amount involved and type of lending such as consortium, multiple-banking and individual, and the loopholes that facilitated the frauds. The analysis has thrown up interesting examples:

Rs 1,679.45 crore bill for ‘fancy shirting’?

A company deposited invoices worth Rs 6,740 crore, out of which Rs Rs 1,679.45 crore was spent on purchasing fancy shirting, it claimed. The CVC, in its report, concluded that while reviewing the invoices and stock records, it could not confirm the physical movement of the material. “Mismatches were found in products mentioned in a letter of credit invoice documents and products mentioned as per books of the company,” the vigilance body said.

A loan for 2,804 vehicles that do not exist

In one of the cases, a logistics company had sought loans from a bank for 2,804 vehicles on the basis of forged vehicle registration documents. The CVC said in its report, “In most instances, even the registration documents were not submitted to the bank whereas in several other instances old vehicles were passed off as new.” It also added that the loans were willfully diverted by the company’s directors and the trucks were never purchased.

A CA who audited a bank and then committed fraud

Another case included a chartered accountant (CA), who was a sleeping partner in the firm and had also conducted the audit of a bank branch where the fraud had been committed. He had used his association with the bank to learn the details of its CBS system and then later used it for his own benefit. “The CA had created several fake and false documents for his own manufacturing factory at a location. He had forged signatures in various documents,” the report said.

A card palace on a balance sheet?

A balance-sheet presented by a company listed down three subsidiaries/associates which were later found to be non-existent. The report noted that the bills of lading generated by the company were also found to be fraudulent because they could not be traced.

The media’s role

Media houses that were involved in fraudulent practices took loans from a bank and then transferred it to other companies where its promoters were directors or authorised signatories.

A bank discounted bills for exports that did not take place

The report cited the case of a company in the export business sector where a bank was discounting the export bills of the company on the basis of Letters of Credit (LC) from prime banks of the buyer. However, it later emerged that export did not take place in 200 cases out of the pending 203 bills, because the consignments did not relate to any export.