J B Boda & Co

January 2010

FOCUS – FRAUD LOSSES AT INDIAN BANKS

Central Bureau of Investigation (CBI) statistics show

that the number of bank frauds is on rise in India. In
2001-02 the number of fraud cases reported were
2035 and the amount involved was INR 5.56 billion
approximately. In 2007-08 the number of fraud cases
reported were 23,247 and the amount involved was
INR 10.59 billion approximately.

Delhi, Kolkata, Mumbai and Bangalore branch of Bank Securities & Fraud
Zone (BS & FC) of CBI have registered/ charge sheeted some of the
The Director of CBI, in his key note address last
important cases in the year 2009 which have deep impact on Banks,
Financial Institutions and Stock Market in India. year highlighted five points:

1. Emergent steps to safeguards Indian banking

BS&FC Delhi Branch of CBI has registered 8 cases against the management of
system from financial crimes: The Public Sector
Delhi based companies who have cheated various Financial Institutions such as
Banks account for approximately 80% of the total
UCO Bank, IDBI Bank Ltd., EXIM Bank, IFCI etc. to the tune of INR 1.12 billion
approximately. deposits and 75% of the total advances of all the
scheduled commercial banks. The overall growth of
global economic activity and current economic crises
A case has also been registered against Director of a firm and 2 bank officials in
glaring the world calls for safeguarding Indian banking
which the accused persons submitted forged Letters of Credit of NATWEST
system from financial crimes and unscrupulous
Bank, London and got it negotiated in State Bank of Bikaner & Jaipur, thereby
activities.
causing loss of INR 591 million to the bank.
2. Statistics show that the number of bank frauds in
A case against the accused Partner of Kanpur based Investment firm and DGM
increasing.
of SBI and others was registered in which the bank has been cheated using Real
Time Gross Settlement (RTGS) system. The bank has suffered a loss to the
tune of INR 450 million. 3. Zero tolerance for corruption: Frauds cause not only
financial loss to the bank but even a loss of reputation.
Two cases relating to cheating of Central Bank of India, Kolkata to the tune of
4. Many frauds occur because the system and control
INR 724.4 million and INR 659.3 million. In one of the cases, four accused
including two bank officials were arrested. are not operated effectively: The banking regulations,
norms and procedures may be overlooked inadvertently
or the lapses committed with the intention of causing
A case was registered against the Directors of Pune based firm who cheated
wrongful gains to the borrowers, even at the risk of
consortium of banks to the tune of INR 2 billion.
exposing the bank to a loss.
A case in which Punjab National Bank was cheated to the tune of INR 1.5 billion
5. Systemic changes to plug the loopholes: A
was also registered against the Directors of Ahmedabad based exports firm.
periodical review of existing system of checks and
balances through proper supervision are the essential
CBI has chargesheeted a case in which the accused forged RBI cheques and
tools for efficient functioning of any organisation. Such
got it encashed through various accounts maintained in various banks. RBI
controls are necessary to reduce the number of bank
suffered a loss to the tune of INR 150 million. In this case, 18 accused were
frauds.
arrested and properties to the tune of INR 50 million were recovered from the
accused.

J B Boda - Crime Insurance Solution

Key Contacts for Financial Institutions Crime Insurance
The group provides financial institutions comprehensive crime insurance solutions for various
types of financial institutions in Asia including commercial banks, microfinance institutions, Singapore: Mr. Ram Garg Mumbai: Mr. C.R. Vaidya
securities depositories, development financial institutions, stock brokers, insurance brokers, +65-6309 1158 +91-22-66314980
investment management firms, insurance companies etc. ram@jbboda.com.sg vaidya@jbbodamail.com