Syndicate Bank Fraud: Disturbing Trend

Bank Fraud on Rise

Bank Fraud on Rise

Gone are the days when masked men would break into banks and get away with gunny bags stashed with currency notes. While about a couple of decades ago such escapades may have caused interest to the press and may have caused the readers to gasp, in the wake of modern technology and surveillance systems, robberies are not a bank’s worst nightmare. Frauds are. More so, when bank employees are found to be in league with such fraudsters. Recent investigations by the Central Bureau of Investigation (CBI) have unearthed an INR 1000-crore fraud perpetrated by four businessmen from the state of Rajasthan on a public sector bank. The fraudsters opened about numerous accounts in at least two different branches of the Syndicate Branch and were in collusion with five of the bank’s personnel. They used various methods to carry out this fraud including issuance of fake cheques, credit against non-existent life insurance policies, and bogus letters of credit.

Here’s What Happened

Between 2011 and 2016, four businessmen – Bharat Bamb (a chartered accountant from Udaipur), Piyush Jain and Vineet Jain (businessmen from Udaipur), and Shankar Khandelwal (businessman from Jaipur) set up 386 accounts with the Syndicate bank at three different branches – the Malviya Nagar branch (Jaipur), MI Road branch (Jaipur) and the Udaipur branch. As account holders, the fraudsters took to getting fake cheques discounted and cashing bills against bogus Letters of Credit apart from arranging overdraft limit against false life insurance policies. These fraudulent transactions ranged from INR 40 lakh right up to INR 5 crore but most of them average between INR 2.5 crore and INR 4 crore. It looks likely that the fraudsters manipulated the loopholes in existing banking practices by depositing fake cheques to get a discounted amount of cash on these. Now, before the cheque is rejected for lack of funds, they would present another cheque of higher face value. This would again get encashed at a discounted amount with some portion of it written off against the previous cheque. What comes as a complete surprise is that all KYC norms were completely flouted through these years without any follow up checks in place. The transactions also escaped detection during audits since many of them had been nullified on paper. Such a massive fraud could not have been concluded without the involvement of bank officials, the CBI concluded. The CBI conducted raids in 10 different locations, in Jaipur, Udaipur, and New Delhi (including offices and residences of suspected officials) in an effort to find incriminating documents. The five bank officials named in the FIR lodged by the CBI are – Satish Kumar Goyal, (General Manager previously posted in Jaipur), Sanjeev Kumar (Deputy General Manager, Regional Office – Jaipur), Deshraj Meena (Chief Manager, MI Road Branch, Jaipur), Adarsh Manchanda (Assistant General Manager, Malviya Nagar branch, Jaipur), and Avdhesh Tiwari (Assistant General Manager, Udaipur). Syndicate Bank has suspended the officials. The CBI seems to have booked the fraudsters on charges of fraud and criminal conspiracy, apart from cheating and forgery. Syndicate Bank officials are yet to make a public statement about the matter; it is also possible that such a statement may not come. It looks likely that senior bank officials in the state have been instructed by the bank not to speak to the media. The happenings did reflect on the stock value of Syndicate Bank on the stock markets. According to, “On March 09, 2016, Syndicate Bank closed at INR 60.35, down INR 0.2, or 0.33 percent. The 52-week high of the share was INR 118.20 and the 52-week low was INR 49.40”.

Growing Trend of Bank Frauds

Disconcerting as it is, the fraud unearthed at Syndicate Bank is only the tip of the iceberg. According to news reports from 2015, public sector banks in the country registered about 2100 cases of fraud (over INR 1 lakh) between April and December 2014 causing these banks a loss of about INR 11,022 crore. According to the response received to an RTI enquiry frauds in PSU banks grew by 100 percent between FY 2013-14 and FY 2014-15, says a news report. This means that NPA (non-performing assets) are not the only concern faced by public banks these days. This fraud is the second to have hit the bank in recent times. In 2014, Syndicate Bank’s Chairman and Managing Director S. K. Jain was arrested on charges of bribery. Jain was accused of receiving a bribe amounting to INR 50 lakh and abusing his official designation to favour corporations and advancing credits illegally. In 2015, another PSU bank was also caught up in another fraud controversy. INR 6,172 crore was allegedly remitted from the bank to Hong Kong-based accounts. It is believed to be black money. The amount had been deposited into 59 different accounts and reported as payments for import of food items. These imports, however, never took place.

Fighting Fraudulent Practices

To curb this growing menace, the Reserve Bank of India (RBI) set up a Central Fraud Registry in May 2015. The registry is meant to check fraudulent practices in banks under the RBI’s purview and re-evaluate and strengthen audit and checks. The Prime Minister’s Office has also been reviewing the fraud detection mechanism of banks over the past year – a clear indication that the growing trend is a major concern for the government.

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