Indian banks admit massive losses to fraud

Duped out of US$817 million in the last financial year.

Finance Minister P. Chidambaram also said the fraud involved 5,569 cases. Citing Reserve Bank of India data, Chidambaram said major fraud included the misuse of loans; lack of proper due diligence by banks and direct sales agents; fake title deeds submitted as collateral and disposal of assets created by loans without the knowledge of the bank.

Central Bureau of Investigation chief AP Singh estimated the total value of bank fraud from 2010 to 2011 at US$698 million, a growth of 53% from the US$370 million recorded from 2009 to 2010.

Singh had said CBI was developing a Bank Case Information System (BCIS) that contains the names of fraudsters, borrowers and public servants.

“This information may also be made accessible to field functionaries of the banking sector in collaboration with the Indian Bank Association once modalities are worked out,” he said.

RBI noted that in some cases, banks did not carry-out the pre-sanction inspection of property used as collateral to ascertain if the property really existed.

There were also instances where borrowers fooled the banks by submitting fake documents related to “know your customer” compliance but could not be found at the given addresses after the release of the loan.