Banks no safe havens for your money; depositors lost Rs 27,000 crore in last five years

Your money may not be safe in the bank, and not because of macro reasons beyond control. Cheating and forgery have led to public and private sector banks losing as much as Rs.27,000 crore cumulatively in the last five years, reveals information obtained by dna under the Right to Information (RTI) Act.

And even this is just a conservative estimate with the actual losses being several thousand crores more. More than 11,500 cases of cheating and forgery of amounts involving Rs.1 lakh and above were reported by banks to RBI. "The smaller amounts are not reported by banks to RBI (Reserve Bank of India). If they are also considered, then the fraud amount will increase by several thousand crores," said an RBI source on condition of anonymity.

The large-scale banking fraud has claimed many victims. Like 32-year-old Hyderabad-based former journalist Nagaraju Kopula, who has been suffering from lung cancer since 2012 and lost Rs.1.23 lakh from his State Bank of India (SBI) account on March 6, 2015. The money had been collected by his friends and family for his treatment and other expenses. "One day somebody called from SBI to ask for my account details and after that all the money was gone," says a broken Kopula, now barely able to speak.

His was amongst the 1,124 cases reported by SBI, the worst hit with losses of Rs.3,494 crore.

Of the Rs.27,000 crore losses, public sector banks accounted for Rs.24,000 crore and the rest Rs.3,000 crore was reported by private sector banks. While SBI headed the list, ICICI Bank leads the list of private sector banks with losses of Rs.1,089 crore in 1,776 cases - the highest amongst all banks. 

Bank view

"The number of complaints is more but amount wise, it is clear that the total amount involved is quite less. It is due to the fact that we have put in some robust systems in place, taking help of technology to put effective checks on the number of frauds," said an SBI spokesperson.

ICICI Bank did not respond to the detailed questionnaire sent by dna.

Cheating and forgery cause losses to the customers in some cases. However, banks lose money in all cases. On July 2, 2012, RBI issued detailed instructions to banks containing details related to how they should examine fraud cases and report them. "Most banks try to put in place robust systems and controls to prevent fraud and forgery – regrettably crooks and criminals use more and more sophisticated methods, especially where online fraud is concerned, to defraud banks," said Meera Sanyal, former chief executive officer CEO and chairperson of the Royal Bank of Scotland in India.

Till the investigations are on, customers who have lost money generally suffer. They are made to run from pillar to post for no fault of theirs.

Why and how

An analysis of big cases looked into by the Central Bureau of Investigation (CBI) reveals that bankers sometimes exceed their discretionary powers and give loans to unscrupulous borrowers on fake or forged documents. After getting the money, the borrower escapes, causing huge loses to the banks.

More than 7,000 employees of different public sector banks are under the scanner for involvement in these cases. The CBI, for instance, has arrested a person in a case relating to the alleged loss of Rs.7 crore to the Indian Overseas Bank (IOB) in the matter of sanctioning and disbursing of cash credit loan on the basis of fake and forged documents.

B Venkat Ramana, general manager, corporate communication, UCO Bank, said the figure given under RTI is yet to be verified by them. The most prevalent nature of cheating and forgery cases relates to forged/fake documents/diversion of funds by borrowers. "When fraud is proved with employees' involvement, (there is a) disciplinary action/criminal case against the employee," Ramana said.

According to the General Manager (Risk Management), Bank of Baroda, the bank immediately carries out an internal investigation if a case of fraud is detected. The incidence is reported to the RBI and a complaint lodged with the local police/state CID/EOW (Economic Offences Wing)/CBI depending upon the amount involved. "In case involvement of the employee is proved, bank takes disciplinary action, which includes even termination/dismissal of the employee," he said.

The Central Bank of India, Indian Overseas Bank, Canara Bank, Axis Bank Ltd, Lakshmi Vilas Bank Ltd, Federal Bank Ltd, Tamil Merchantile Bank Ltd did not respond to the questionnaire sent by dna.

'Banks should constantly upgrade processes and systems'

Ultimately fraud is like any other crime – the criminal attacks what he believes to be "soft" targets. Close attention and vigilance on the part of both banks and customers is therefore the best deterrence. For example, it is important that banks constantly review and upgrade their processes and systems to be as robust as possible. Equally, customers must safeguard things like their cheque books (to protect against the commonest type of physical fraud) and passwords (to protect against electronic fraud). They should not be gullible and fall prey to get rich quick schemes and phishing attacks.

Nowadays, most banks offer sms alert facilities - I strongly recommend that customers activate this facility, so that if there is any suspicious activity on their account they take immediate corrective action. The OTP facilities that are now mandatory for most credit cards and on line payments are also a very good fraud control measure.

Dormant accounts are a happy hunting ground for fraudsters - both banks and customers should monitor these closely. The above are a few illustrative (though not exhaustive) suggestions to control fraud.

—Meera Sanyal (former CEO & chairman of the Royal Bank of Scotland in India)

SMS said the money credited, but later bank went into denial

Santosh Dandharia, a petrol pump owner in Banda district of UP, alleges that he lost Rs 15 lakh as Allahabad Bank officials cheated him. On March 16, 2015, Dandharia deposited Rs 15 lakh in his account. Soon, he received an SMS stating that the money has been credited. The same evening, he received another SMS saying the transaction of Rs 15 lakh has not happened.

Dandharia checked his account and upon finding the money not credited contacted the bank officials, who said the money has never been deposited.

With bank looking the other way, he approached the police who registered an FIR against the bank officials. Dhandharia is yet to get back his money. " I really hope that I get it back. It's my hard earned money," Dhandharia said.

He lost the money his friends collected for cancer treatment

Hyderabad-based Nagaraju Kopula, 32, a former journalist with The New Indian Express and a cancer patient, lost Rs 1.23 lakh from his SBI account on March 3, 2015. Born into a poor family, Kopula was struggling to meet both ends meet since he was diagnosed for lung cancer in 2012. The money was collected by his friends and fellow journalists towards his treatment expenses.

Barely able to speak now, Kopula told dna in a trembling voice, "One day somebody called from SBI, asking for my account details. After that there was no trace of the money."

Nagaraju's friends complained to the bank but till now nothing has been recovered. Now with the money gone, Nagaraju is worried whether he will be able to survive any longer. " I don't know what will happen to me," he said.