1. If you owe the bank Rs 1 lakh, that’s your problem.
If you owe the bank Rs 100 crore, that’s the bank’s
problem.
INFAMOUS JOKE ON
INDIAN BANKING SYSTEM
5. HOW IS FRAUD DIFFERENT FROM
CONVENTIONAL NPAs?
◦ “Frauds are different from normal NPAs in that the loss is because of a patently illegal action, by
either the borrower or the banker,” according to Raghuram Rajan’s 22-page note to Parliament
on NPAs.
◦ The former RBI governor had said that without any precedent of recovery or successful
prosecution of alleged fraudsters, the classification of an account as fraud itself creates a self-
serving problem equivalent to that of the proverbial chicken and egg story.
6. BIGGEST RECENT BANKING FRAUDS
Very RECENT is PMC BANK involving an amount of Rs. 6500 crore.
7. Nirav Modi Scam
-Also called PNB Scam
◦ Relates to fraudulent letter of undertaking worth ₹11,356.84 crore .
◦ People INVOLVED
◦ The fraud was allegedly organized by jeweller and designer Nirav Modi, his wife Ami Modi, brother Nishal
Modi and uncle Mehul Choksi, all partners of the firms; along with PNB officials and employees, and directors
of Nirav Modi and Mehul Choksi's firms have all been named in a charge sheet by the CBI.
◦ Nirav Modi and his family absconded in early 2018, days before the news of the scam broke in India.
◦ REFORMS
◦ On 1 March 2018, the Government approved the Fugitive Economic Offenders Bill to deter economic
offenders from evading the process of Indian law by giving powers to the government to confiscate assets of
a fugitive, including Benami assets of absconding loan defaulters.
◦ In March 2018, the Reserve Bank of India scrapped banking instruments such as the Letter of
understanding (LoU) and Letter of Comfort (LoC) that in an attempt to plug a loophole and improve banks’
due diligence in trade credit.
13. PMC Bank
FRAUD CASE
◦ Amount involved worth Rs. 6500 Cr.
◦ People Involved:
◦ The crux of this bank fraud is that the
higher management of the PMC
bank has given huge loan to the Housing
Development and Infrastructure Ltd
(HDIL) and its group entities. This fraud
case is related to transfer of 70% of
the total credit facilities of
the PMC bank to HDIL and its
associated companies.
14.
15. ALLAHABAD BANK FRAUD
◦ Allahabad Bank reports Rs 1,775 cr. fraud by Bhushan Power & Steel.
◦ "It has been observed that the company has misappropriated bank funds, manipulated books of
accounts to raise funds from consortium lender banks. At present, the case is at the NCLT which is
in advance stage and the Bank expects good recovery in the account," the bank added.
21. REASONS OF Why Indian
bankers are hesitant to report
frauds?
◦Reputational risks
◦Interference of probe agencies.
◦And the instinct of Self-Preservation.
