SCAMS IN BANKING INDUSTRY

STD: TYBBI
 INTRODUCTION
• Banks are essential part of the Indian economy.

• While the primary responsibility for preventing frauds lies with banks themselves.

• Banks dealing with public’s money: due care and diligence.

• The RBI advisory to banks for prevention of frauds.

 DEFINITION
• Fraud is the crime of gaining money or financial benefits by a trick or by lying.
Table 1: Number of frauds cases reported
by RBI regulated entities
(No. of cases in absolute terms and amount involved in Rs.
Crore)

SI.NO Category NO. of cases Amount involved

1 COMMERCIAL BANK 169190 29910.12

2 NBFCs 935 154.78

3 UCBs 6345 1057.03

4 FIs 77 279.08

5 Total 176547 31401.01

 Types Of Frauds
• Cheque fraud:- Most common cases of this kind of fraud are through stolen cheque and forged
signatures.

• Computer fraud:- Hacking, tampering with a diskette to gain access to unauthorized areas and
give credit to an account for which the funds were not originally intended.

• Loan fraud:- When funds are lend to a non –borrowing customer or a borrowing customer
that has exceeded his credit limit.

• Credit card fraud :- Credit card fraud is when someone uses your credit card or credit account
to make a purchase you didn't authorize. Fraudsters can also steal your credit card account
number, PIN and security code to make unauthorized transactions, without needing your
physical credit card.

• Voice Phishing:- Voice phishing is also known as vishing. In this fraud, fraudsters pose saying
they are from a reputed Organization and ask your personal banking details. After collecting your
personal banking information, they use it steal money from your bank account.
 Reporting of frauds to RBI
• Frauds involving amount of less than Rs.1.00 lakhs :Less than Rs 1.00 lakhs are not to be reported individually to the RBI.

• Frauds involving amount of 1.oo lakhs and above 25.00 lakhs but less than 25.00 lakhs should be reported to the regional

office of urban bank department of RBI.

• Frauds involving amount of 25.00 lakhs and above should be reported to central frauds monitoring cell, department of banking

supervision , RBI.

NOTE:

FIR is the key document for reporting frauds.

 Major two scams in India
• 1. Neerav Modi Bank scam:

This bank scam is being called the biggest scam (Rs 11,400 crore) in
the banking sector of India. The main accused of the scandal is
billionaire jeweller Nirav Modi and his uncle Mehul Surakshi (owner of
Gitanjali James). Both of them had received "Letter of Undertaking"
from the consent of the employees of PNB’s Mumbai branch and
withdrawn the funds from the foreign banks on the guarantee of Punjab
National Bank.  However, the Enforcement Directorate has seized
assets of Nirav worth over Rs 5870 crore.
2. Bank Scam by Vijay Mallya:

Mallya's Kingfisher Airlines had borrowed Rs 9,432 crore from 13 banks

till February 2018. The State Bank of India was the biggest lender with
1600 cr. followed by the PNB 800 cr,  IDBI 650 cr and Bank of Baroda
lend 550 cr. Malya left India on March 2, 2016 and hiding in the London
and the government of India is fighting for his extradition till date.
 Conclusion
• Bank frauds are done to make money by cheating the banks. There are several loopholes in
banking system that has been used by fraudster the number of banks scams have been
increasing year on year along with that, RBI also engage in making banking system accurate and
secured.