Gaurav Choudhury
Moneycontrol News
Inflated valuation of goods, fudged bills, shell companies for diversion of funds are the common threads that run through India’s top 100 banking frauds analysed by the Central Vigilance Commission.
The country’s top anti-corruption watchdog has indicted the public-sector banks, already reeling under a mountain of Rs 10 lakh crore of unpaid debts, for failing to check the credentials of loan-seekers and relying too much on the third party to do the job.
The report, a copy of which is with moneycontrol.com, was submitted on October 15 and has suggestions for the Reserve Bank of India for improved checks and balances.
The report does not name any company or individual but has details of investigations into sectors ranging from gems and jewellery, aviation, media, pharma and agriculture.
| Sector | Cos/people investigated |
| Gems & Jewellery | 3 |
| Manufacturing | 5 |
| Agro | 3 |
| Aviation | 1 |
| Service | 3 |
| Discounting cheques | 1 |
| Trading | 3 |
| IT | 3 |
| Export | 4 |
| Media | 2 |
The report details how lenders were cheated, lapses on part of the banks and suggestions to plug them.
For instance, in its report on three gems and jewellery firms, the CVC found that the companies inflated the value of diamonds to avail higher credit.
The details of debtors submitted to the bank to avail credit were false and fabricated.
The findings are similar to what the investigating agencies looking into the alleged Rs 13,000-crore PNB fraud committed by jeweller Nirav Modi and Mehul Choksi have to say.
It goes on to say that due diligence report on borrowers were not obtained before submitting the sanction/renewal proposal. “…However comforts like LC/SBLC were not insisted to ensure timely payments of exports whereas imports were on the basis of SBLC,” the report says.
No credit assessment was done for these customers. There was no proof of delivery of the goods to customers, a fact pointed out by the investigating agencies which also raised the issue of proof of delivery of gold and diamond jewellery to foreign companies.
Also Read: Big bank scams: 13 frauds that shook the Indian financial sector
Banks should have done due diligence on the buyers and confidential report (CR) on all foreign buyers should have been obtained, the CVC says.
Looking at the manufacturing sector, it found that the five companies it probed had forged export bills. In fact, a textile firm claimed making purchases of Rs 6,740 crore, with Rs 1,679.45 crore set aside for buying “fancy shirting”. But a review of invoices and stock records was unable to confirm physical movement of the shirting material.
A company had inflated its turnover while in another, the management of the company misappropriated funds.
This is also how the two media companies defrauded the banks. The companies, which the CVC says are in the business of television channels, printing and publishing newspaper and periodicals, transferred the funds credited in suppliers accounts to other companies where promoters were directors or authorized signatories.
Many of the suppliers were non-existent and also the companies submitted inflated and fabricated invoices to the banks for securing higher limits.
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