Fraudulent bank loans hit Rs 6,000 cr in 2011, CBI probe on

Indian banks are headed for more trouble after the bank fraud cell at the Central Bureau of Investigation registered cases worth Rs 6000 crore in calendar year 2011, sources told NDTV Profit. The Mumbai division of the unit alone registered cases involving Rs 2,000 crore.

Sources said most of these loans could turn into non-performing assets (NPAs), or bad loans. The numbers will hurt the balance sheets of Indian banks, most of whom are already struggling with rising NPAs.

In fiscal 2012, Indian banks sought to restructure $12 billion (about Rs 65,000 crore), up 156 percent from a year earlier. In In April 2012, at least 18 cases, accounting for more than Rs7,300 crore were referred to the Reserve Bank of India’s corporate debt restructuring (CDR) cell.

All of these cases involve fraudulent loans taken out by companies that, in most cases, have no assets or businesses to back it up. The CBI has registered cases against the promoter of such companies and some bank officials could also be held, the sources said. In many of these cases, the banks failed to check and implement their Know Your Customer (KYC) norms that are meant to protect against such fraud.

Since January 2012, cases worth Rs 150 crore have already been registered by the CBI.

The deception has hit both state-owned and private sector banks, but 80 per cent of the loans involve public sector banks.

In wake of the large amount involved, the CBI is also planning to write to the Reserve Bank of India, asking it to direct banks to implement KYC norms more strictly.

Increasingly, banks are approaching t CBI cell to investigate suspected cases of bogus companies taking out loans and then defaulting.

However, it is not just customers that are defrauding banks – in some cases, the banks are doing it to themselves.

In a major scandal last year, the CBI found that four nationalised banks -- Bank of Maharashtra, Central Bank, Oriental Bank of Commerice and IDBI – had themselves opened about 10,000 fictitious accounts and transferred various loans worth Rs 1,500 crore into them.

The single largest instance was of a non-existent firm based in Gujarat – Biotor Industries – that was given loans of Rs 500 crore, allegedly in the names of farmers.

OBC & Central Bank of India had the maximum exposure of Rs 120 crore each, while IDBI had Rs 115 crore and Bank of Maharashtra, Rs 50 crore.

The CBI is investigating that case, and has also questioned senior management on how KYC norms were flouted on such a large scale.