Biggest Banking Frauds in Indian History

Wherever money is involved, fraudsters always find a way to exploit and make money for themselves. Therefore it is no surprise that the banking sector, which predominantly deals in money, has thousands of frauds reported every year. According to a report, around 7400 banking frauds have been reported in the financial year 2020-21 itself. Such a huge number of frauds result in extreme losses for the country, especially when the economy is still recovering from the consequences of the COVID-19 pandemic.

There have been many high profile cases of large scale banking frauds in the past, due to which many laws and regulations have been made and amended to avoid future losses to the country. In spite of that, there are still frauds and scams being reported everyday across India. The following are some of the cases of the biggest banking frauds in the history of India.

1. Kingfisher, United Spirits (The Vijay Mallya Scam)

The Vijay Mallya Scam was one of the most publicized cases in India. Vijay Mallya has been accused of fraud and money laundering cases and he owes 9000 crores to 17 banks in India. He fled from the country in 2016.

Vijay Mallya’s business was deep in losses after various unplanned and rash decisions taken by him. His advisors told him to stop and take all the factors into consideration before taking huge decisions like buying an airline company which is in debt, or taking loan after loan to always have a steady flow of money despite the lack of it. To continue running the business even after losses, he took many loans of varying amounts from different banks in the country. He was a member of the Rajya Sabha, which is why he was given loans by other banks even after SBI declared him as bankrupt. When his company finally shut down it’s operation and the banks demanded repayment of their loans, Vijay Mallya declined to pay the loan. He was forced to resign from his position of chairman by the company. When the banks filed a case against him, he flew away to the United Kingdom.

2. Nirav Modi, Mehul Choksi and other relatives (The PNB Scam)

Another huge and well known case was the Punjab National Bank Scam, which is referred to as the biggest fraud in the banking history of India. It is often said that PNB will be unable to recover from those huge losses for a very long time. It was a 10,000 to 14,000 crore scam, which was carried out primarily by Nirav Modi- a jeweler and designer, Mehul Choksi- his maternal uncle and other relatives. In 2018, Punjab National Bank lodged an FIR with the CBI. All the accused, including Nirav Modi, his uncle and the relatives, fled outside the country and took refuge in the UK. Currently, Nirav Modi is reported to be in Britain in the United Kingdom seeking political asylum.

3. Bhushan Power & Steel (The Allahabad Bank Scam)

Allahabad Bank filed a case against Bhushan power & Steel, a company that had defaulted on payments of loans worth 1774 crores. Prior to this, Punjab National Bank reported a 3800 crore fraud by the company. According to the CBI, the company redirected around 2348 crores through the staff’s loan accounts and transferred it to more than two hundred shell companies. There was also no clear or specific reason found as to why the money was being transferred in this way.

4. C. Sivasankaran (IDBI Bank Scam)

Aircel founder C. Sivasankaran and fifteen current and previous employees of IDBI were booked by CBI for a fraud of 600 crores. Many authoritative figures like the independent directors, the executive directors and the chief general manager of IDBI were arrested. These funds that were scammed were apparently used to pay the debts of other group companies.

The Indian Banking System is made in a way that facilitates all kinds of financial wishes of any individuals or companies. One such facility is the loan facility. Loans help the ones who are extremely in need to buy houses, food, clothes and education- their basic necessities. Loans to bigger and vast corporations are a way to expand the business as well as to tend to the economy. However, when such frauds and scams occur, the banks have very few ways of recovering the losses endured by them. The companies and individuals should understand that the banks function for the ease of monetary access to them and not as a way to cheat from the country.