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CONCEPT – BANK SCAMS
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- The banking system of any country comprises of the small savings of the people. When a large number of people deposit the money into banks, it becomes the huge amount in the hands of the banks. Commercial Banks lends this money to individuals, traders and institutions and earns profits in the form of interest. But when these lenders do not return this amount to the banks it becomes the Non Performing Assets (NPA) to the banks which further creates threat to the existence of the banks.
- This Concept gives the information about the recent scams occurred in the Indian Banking System.
- As on 31 March 2018, Indian bank's; Gross Non-Performing Assets (NPAs), or bad loans, stood at Rs. 10.25 lakh crore. On quarter, the NPA has grown by Rs. 1.39 lakh crore or 16% UP from Rs. 8.86 lakh crore as on 31 December 2017.
- Over 6,800 cases of bank fraud involving an unprecedented Rs 71,500 crore have been reported in 2018-19, the Reserve Bank of India.
- A total of 5,916 such cases were reported by banks in 2017-18 involving Rs 41,167.03 crore,
- As many as 6,801 cases of fraud were reported by scheduled commercial banks and select financial institutions involving an amount of Rs 71,542.93 crore in the last fiscal (increase of over 73 per cent in the fraud amount).
- In the last 11 fiscal years, a total of 53,334 cases of fraud were reported by banks involving a massive amount of Rs 2.05 lakh crore.
- During 2008-09, a total of 4,372 cases were reported involving an amount of Rs 1,860.09 crore. In 2009-10, Rs 1,998.94 crore worth fraud was reported in 4,669 cases.
- A total of 4,534 and 4,093 such cases were reported in 2010-11 and 2011-12 involving Rs 3,815.76 crore and Rs 4,501.15 crore, respectively.
- In the 2012-13 fiscal, 4,235 fraud cases involving Rs 8,590.86 crore were reported by banks as against 4,306 cases (involving Rs 10,170.81 crore) in 2013-14 and 4,639 cases (involving Rs 19,455.07 crore) in 2014-15.
- As many as 4,693 and 5,076 cases of fraud were reported in 2015-16 and 2016-17 involving Rs 18,698.82 crore and Rs 23,933.85 crore, respectively.
- SOME CASES TO STUDY
- 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.
- 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 Rs.1600 cr. followed by the PNB at Rs.800 cr, IDBI at Rs.650 cr and Bank of Baroda at Rs.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.
- Allahabad Bank Scam
- Kolkata-based Allahabad Bank has said it has an exposure of Rs. 2,363 crore in the PNB fraud case.
- However, Allahabad Bank stressed that it is sure about the recovery of the payment as the exposure was fully secured by Letter of Undertaking (LoU) documents.
- “The bank, through our overseas branch at Hong Kong, has been taking exposure with Punjab National Bank as counter-party under various Letters of Undertakings issued through authenticated SWIFT message”.
- To do the scam in the Allahabad bank; the SWIFT technique is misused by the internal employees of the Allahabad bank. The internal banking system of the Allahabad bank was not attached to the SWIFT that is why the transactions were not mentioned in the accounting book of the Allahabad bank. That is why there was no transaction record found between the PNB and Nirav Modi.
- Rotomac Pen Scam
- The Promoter of Rotomac pen Vikram Kothari, allegedly fraudulently cheated Rs. 3,695 crore with seven banks. Kothari has misappropriated loans worth Rs 2,919 crore from 7 banks and the total outstanding amount, including interest on him, is Rs. 3,695 crore. The CBI has arrested managing director of Rotomac Global Pvt Ltd Vikram Kothari.
- This scam is related to the biggest Private Sector Bank of the country i.e. SBI leading the consortium of 14 public and private sector. The principle loan is about Rs. 824 crore, adding the interest due would indicate a loss of more than Rs 1,000 crore to the banks.
- R P Info Systems Bank Scam
- The CBI has booked a computer manufacturer R P Info Systems and its directors for allegedly cheating a consortium of 9 banks with amount of Rs. 515.15 crore. This company has used fraud documents to take the loan. CBI had raided the offices of the company in Kolkata and other places on February 28, 2018.
- Simbhaoli Sugar Mills Bank Scam
- CBI has registered another bank fraud against one of India's largest sugar mills- Simbhaoli Sugars Ltd, amounting to Rs 200 crore. There are 10 people have been booked, including the chairman of Simbhaoli Sugar Mills Limited Gurmeet Singh Mann, Deputy Managing Director Gurpal Singh and CEO GSC Rao.
- According to an estimate, in the last three years, the bank scams of around Rs. 23,000 crore have taken place in the country, due to which the country's banking system has suffered a lot. This is why the total NPA of the country's banks has crossed the mark of 10 lac cr in June 2018. Now it is the need of the hour that the government should take some concrete actions to check the Crony capitalism and the intervention of the politicians in the functioning of the banks in India.
- Harshad Mehta Scam
- The year 1992 will go down in the history of India as the year of the stock market scam. Harshad Mehta, a broker known for his rags-to-riches story and a poster boy for many investors, had used receipts of public sector banks to manipulate stock prices.
- Mehta siphoned off around Rs 1,000 crore from the banking system to buy stocks on the Bombay Stock Exchange. As he pumped in money, the markets continued to achieve new highs. Retail investors took cues from what Mehta was buying and followed in the footsteps of the ‘Big Bull’.
- In the period between April 1991 and April 1992, the Sensex went into a frenzy and returned 274 percent, moving from 1,194 points to 4,467. That is the highest annual return for the index.
- The scam came to light when the State Bank of India reported a shortfall in government securities. That led to an investigation that later showed that Mehta had manipulated around Rs 3,500 crore in the system. On August 6, 1992, after the scam was exposed, the markets crashed by 72 percent leading to one of the biggest falls and a bearish phase that lasted for two years.
- Mehta was jailed in 1992. In 1995, he again caused a furore when he claimed that he made a donation of Rs 1 crore to PV Narasimha Rao, the then prime minister, and the ruling Congress to set him free. He died in jail on December 31, 2001, after a cardiac arrest.
- It was around the time Ketan Parekh, another stock broker, was being probed for using bank and promoter funds to manipulate stock prices. Like Mehta, Parekh was later convicted and banned from trading.
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