PSU banks detect frauds worth over 5.2K cr during Apr-Sept AGENCIES: NEW DELHI, DEC 14 2012, 20:28 IST
New Delhi: More than 1,700 fraud cases involving over Rs 5,200 crore were detected in the state-owned banks during the first six months of this fiscal, government said today.
Union Bank of India reported fraud amounting to Rs 656.26 crore, followed by Punjab National Bank (Rs 619.86 crore), Bank of India (Rs 473.45 crore), State Bank of Hyderabad (Rs 429.31 crore), and State Bank of India (Rs 376.97 crore). In all, 28 banks reported these frauds.
As per the data provided by Minister of State for Finance Namo Narain Meena in a written reply in the Lok Sabha, 1,714 cases of frauds were reported in public sector banks in the first half (April-Sept) of the financial year 2012-13. The amount involved in the frauds totalled Rs 5,210.56 crore.
In 2011-12, state owned banks had reported 3,392 frauds involving Rs 4,025.3 crore.
Meena further said that 12,252 employees of public sector banks have been probed in fraud cases since 2009-10 till September 30, 2012.
To another reply, he said that PSU banks have detected home loan scams amounting to Rs 55.4 crore in the first nine months of 2012.
As per the data, there were frauds in the housing loan segment to the tune of Rs 6.77 crore in the Syndicate Bank, followed by Corporation Bank (Rs 6.03 crore) and Allahabad Bank (Rs 4.40 crore) till September 30, 2012.
In all, 288 such banking frauds had taken place till September 30.
During 2011, the amount involved in home loan scams was Rs 180.52 crore crore. There were 596 such incidents in PSBs.
Meena said banks probe staff accountability and their involvement in all the fraud cases. On the completion of the investigation, the commensurate punishment is awarded to the delinquent employees, he added.
In another reply, the minister said Debts Recovery Tribunals (DRTs) disposed of 7,792 cases related to dues of banks and financial institutions involving Rs 13,575 crore till October during this year.
DRTs had disposed of 12,122 cases involving Rs 21,155 crore in 2011.
In yet another answer, Meena said that the ratio of Gross Non-Performing Assets (GNPAs) to Gross Advances in Scheduled Commercial Banks increased from 2.36 per cent in March 2011 to 2.94 per cent in March 2012 and further to 3.57 per cent in September 2012.
http://www.financialexpress.com/news/psu-banks-detect-frauds-worth-over-5.2k-cr-during-aprsept/1045397/2
| India lost Rs 6,600 cr to fraud in FY12: E&Y report |
| Insiders enable 61% of frauds financial services hit the worst |
| BS Reporter / New Delhi Nov 02, 2012, 00:59 IST Businesses in India recorded losses worth a whopping Rs 6,600 crore in the last financial year, with a significant portion of these frauds occurring in the financial services sector. About 63 per cent of the fraud cases in FY12 were reported in the financial services sector. Banks were the most common victims, followed by insurance and mutual fund companies, according to Fraud Indicator, a first-of-its-kind report by consulting firm Ernst & Young. The report attributes the high number of frauds in the financial sector to oversight from the senior management, deviation from processes, lapses in the system, etc. “With banks and NBFCs (non-banking financial companies) still struggling to recover from the 2008 financial crisis, it’s a double blow for them---they are being exposed to increasing incidents of frauds, loan scams and regulatory bodies raising questions against the soundness of their compliance practices,” said Arpinder Singh, partner, Ernst & Young, and national director, Fraud Investigation and Dispute Services. The report shows losses incurred by banks due to fraud rose 88 per cent in 2010-11, exceeding Rs 3,790 crore. About 79 per cent of the major fraud cases (cases worth more than Rs 1,000 lakh) were due to the involvement of senior managements of companies and their direct interference in the company’s decisions. The total value of frauds against investors was about Rs 2,700 crore. Singh said there was an increase in the magnitude of frauds in the country in the second half of FY12, with the value of such incidences rising 36 per cent compared to the first half the year and the number of fraud cases rising eight per cent in the same period. Fraud Indicator looks at frauds in various areas—businesses, government segments and individuals. About 1,80,000 instances of frauds reported in the media were analysed for the study. “What we found alarming in this edition was insider-enabled frauds accounted for 61 per cent of the reported fraud cases. Entrusting your employees with confidential information, giving them a right to access the company’s bank accounts, etc, may be essential, but this should be done with some scepticism. This makes it imperative for companies to take some ground-breaking steps like monitoring employee behaviour and taking appropriate action against rogue employees,” Singh said. With fraud cases reported in 24 of the 29 states and the difference between Tier-I and Tier-II cities (47 per cent and 53 per cent, respectively) very small, it is evident frauds were reported across the country. Delhi saw the highest number of frauds, as well as the highest aggregate losses by fraud in 2011-12. It also recorded the highest average losses (Rs 80 crore), followed by Andhra Pradesh (Rs 50 crore) http://www.business-standard.com/india/news/india-lost-rs-6600-cr-to-fraud-in-fy12-ey-report/491463/ 
CBI developing database to curb banking frauds
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| As Libor probe grows, it is now every bank for itself | ||||||||||||||||||||||
Azam Ahmed & Ben Protess / Aug 08, 2012, 00:55 IST ( Collected from Business Standard)
Major banks, which often band together when facing government scrutiny, are now turning on one another as an international investigation into the manipulation of interest rates gains momentum.
With billions of dollars and their reputations on the line, financial institutions have been spreading the blame in recent meetings with authorities, according to government and bank officials with knowledge of the matter. While acknowledging their own wrongdoing, institutions are pointing out actions at other banks that they believe are worse — and in some cases, extend to top executives.
One official involved in the case said that banks are emphasising that “we’re not as bad as the next guy.”
The Swiss bank UBS, which has a history of regulatory run-ins, has shared emails, instant messages and other information suggesting it had colluded with traders at Deutsche Bank, HSBC and the Royal Bank of Scotland to manipulate key interest rates, according to court documents and bank employees. In talks with authorities, HSBC is providing its own account of the activities, according to a lawyer briefed on the matter. Citigroup has also detailed rate manipulation with other banks.
When the British bank Barclays recently negotiated a settlement with authorities, it highlighted that other European institutions took part in the rate-rigging scheme, said officials close to the case. Like UBS, Barclays has provided information on activities involving HSBC and Deutsche Bank. Several banks are using Barclays’ $450 million settlement as a guidepost in preliminary discussions with authorities.
JPMorgan Chase and Citigroup are each emphasising to uthorities that their chief executives were not implicated in the wrongdoing as in the case of Barclays, and therefore the banks deserve to be treated less severely, according to the officials.
A Deutsche Bank manager who oversaw traders is facing scrutiny, according to a person involved in the case. However, a Deutsche Bank spokesman said no managers or top executives had been aware of any rate manipulation, adding that the investigation was continuing. JPMorgan, Deutsche Bank, HSBC and Citigroup have said they are cooperating with officials. Authorities around the world are investigating more than 10 big banks for their roles in setting global interest rates like the London interbank offered rate, or Libor. Such benchmarks underpin trillions of dollars of financial products, including mortgages and student loans. Regulators are examining whether banks colluded to move the rates up or down to get extra profits and limit losses on their trading positions. Some banks are also under investigation for reporting artificially low rates to make themselves appear financially healthier. When banks first started conducting internal investigations at the behest of regulators two years ago, they figured the potential penalties would be manageable, according to bank officials. But the size of the Barclays settlement and the growing public outcry have left banks scrambling to limit their culpability as the threat of criminal actions increases. Part of the banks’ problem is that their internal investigations have created a road map that authorities are using to pursue criminal and civil cases.
Those findings provide a detailed portrait of the wrongdoing.
Interviews with dozens of government and bank officials who spoke on the condition of anonymity because the investigation is developing, and a review of court documents and regulatory filings show varying degrees of exposure. Banks like UBS, Deutsche Bank and Citigroup uncovered that employees had worked with traders at other firms to influence rates, according to government and bank officials. A small number of institutions, including Credit Suisse and Bank of America, found more limited actions. The extent of the evidence has created an every-bank-for-itself attitude. The financial industry often tries to negotiate a common deal to avoid getting singled out for bad behaviour. This year, five banks collectively struck a multibillion-dollar agreement with federal authorities to address foreclosure abuses.
With the rate investigation, institutions are not sharing information or even discussing the case with rivals, according to lawyers involved in the matter. In part, they do not want to appear to have close ties with their rivals, since such cozy relationships are part of the government’s inquiry.
“There is no information-sharing among banks unlike the past 15 years of federal investigations,” said a lawyer involved in the case.
So far, Barclays has borne the brunt of the fallout. In June, the British bank settled with British and American authorities for reporting false rates to bolster its profits and project a rosier picture of its financial position. The settlement prompted the resignation of top executives, including the chief executive Robert E Diamond Jr, and helped to erase more than $3 billion of the bank’s market value.
At first, Barclays rejected a settlement offer by the Commodity Futures Trading Commission, the regulator leading the investigation, according to officials close to the case. The bank believed the terms were unfavorable, said a lawyer involved in the matter. As the agency prepared to take the case to court, negotiations resumed. While Barclays secured a modestly smaller penalty, the bank still paid record fines. In trying to work out a deal, the British bank offered information on the multiyear scheme with Deutsche Bank, HSBC, Société Générale and Crédit Agricole, according to government and bank officials. Also, a senior trader at Barclays tried to manipulate the Euro interbank offered rate, or Euribor. Other cases are expected to follow. The Justice Department is aiming to file criminal actions against two banks before the end of the year and is preparing to arrest former traders at Barclays and other banks, according to government officials. In addition, state attorneys general and local district attorneys have approached the Justice Department in recent weeks, seeking a role in the case. Since the Barclays settlement, banks have been reassessing their defense strategies and reaching out to authorities. Officials warn that all talks with the banks are preliminary, and no settlement deals are imminent.
After targeting Barclays for rate manipulation four years ago, regulators gradually turned their attention to a wide swath of banks.
In a 2010 letter, the Commodity Futures Trading Commission contacted a small group of banks, including UBS. The regulator quickly expanded the list, sending a memo to all 16 institutions that helped set Libor rates at the time. The agency ordered the firms to hire outside attorneys to conduct an investigation into suspected rate manipulation, according to bank and regulatory officials. After examining the extent of its wrongdoing, UBS moved swiftly to strike an immunity deal with government authorities. In its inquiry, the Swiss bank uncovered that one of its former traders, Thomas Hayes, had apparently worked with employees at Deutsche Bank, HSBC and the Royal Bank of Scotland to influence rates and make profits, according to bank officials and court documents. At times, the traders communicated via instant messages on Bloomberg machines, the court documents show. UBS was eager to cooperate in part because the government typically only grants immunity to the first party to step forward in a case. The Swiss bank also wanted to avoid the harsh spotlight of a prosecution or a settlement, according to a bank official. The bank has been at the center of several financial scandals, including a rogue trader and an illegal tax shelter scheme. Citigroup has been forthcoming with regulators, as well. After leaving UBS, Hayes moved to Citigroup where the problems continued, according to bank officials with knowledge of the case. The bank has handed over documents on that rate-rigging group. Citigroup is emphasising to authorities that the wrongdoing did not reach the upper levels of management, as it did at Barclays. Based on its internal investigation, the bank told regulators and its audit committee that neither its chief executive, Vikram S Pandit, nor its chief financial officer, John Gerspach, was implicated, according to a bank official and a lawyer with knowledge of the matter. The bank’s investigation showed that its wrongdoing is mainly centered on another key benchmark, the Tokyo interbank offered rate. In contrast, Deutsche Bank is facing heavier scrutiny in the United States. The German institution has been named in the rate conspiracies outlined by Barclays and UBS, as has HSBC. In working with regulators, HSBC is making employees available to government investigators and turning over emails and other information, according to one person with knowledge of the matter. http://business-standard.com/india/news/as-libor-probe-grows-it-is-now-every-bank-for-itself/482676/ Following is the copy of Email received from Sri Sandeep Kappor which is eye opener for regulating agencies who are responsible to prevent, monitor and take punitive action against perpetrators of fraud or who by concealing fraud try to save fraud masters.
Chief General Manager
Reserve Bank of India
Fraud Monitoring Cell
Department of Banking Supervision,
Third Floor, World Trade Centre, Centre 1
Cuffe Parade, Mumbai - 400 005
Subject: Complaint of Rs 200 Crore Banking Fraud
Dear Sir,
I hereby report a case of 'willful fraudulent bank defaults' by Athena Financial Services Limited, Pune (erstwhile Kinetic Finance Limited).
Company Borrowed 200 Crores from 25 Banks/FIs/MFs:
On 20th December 2001 a consortium of 21 banks led by State Bank of India signed a working capital loan agreement with Kinetic Finance Limited Pune for a sum of 144.56 Crores. Subsequently some more banks joined in by signing supplementary agreements.
On 7th January 2003 Kinetic Finance Limited borrowed Rs 30.00 Crore by issuing fully secured NCDs (redeemable on 7/9/2003), issued to Canara Bank MF, BOB MF & UTI Bank.
On 10th July 2003 Kinetic Finance Ltd. borrowed another Rs 20.00 Crore by issuing fully secured NCDs (redeemable on 9/7/2004), issued to UTI MF (ULIP & CRTS)
The default
On 30th June 2003 the company shows a loss of 8.98 Cr (Apr-Jun Quarter of 2003-04).
On 30th November 2002 a stock audit report conducted by SBI indicated inflated stock position by inclusion of NPAs and overdue account by Kinetic Finance. Audit also revealed that hire purchase agreements were not signed by the authorized signatory on behalf of the company & proposal forms & other documents were not filled properly.
By August 2003 the company started defaulting on regular payments of debts & evading submission of monthly stock statements.
On 29th November 2003 in the 13th Annual General Meeting held on 29th Nov 2003 the resolution was approved by the members of the Company to change the name of the Company from Kinetic Finance Ltd to Athena Financial Services Ltd.
Subsequent to this Promoter Directors (Mr Arun H Firodia & Ms. Sulajja Firodia Motwani) resigned from the company & 6 dummy directors appointed from within the Kinetic group who were long term loyalists of Firodias.
In Jan 2004 Consortium of banks conducts 'Special Investigation Audit' in the operations & accounts of Kinetic Finance Ltd.
On 20th February 2004 the report of 'Special Investigation Audit' was submitted & consortium asked for explanation by the company.
On 23rd March 2004 the company issued a letter to consortium giving explanations of observations made in the 'Special Investigation Audit' by the consortium. This letter showed that the Company had fraudulently violated the terms and conditions of all the loan agreements jointly and severally with the intention to defraud the Consortium bank members. The acts and omissions of the Company brought out in the said audit report clearly revealed the dishonest intentions of the Company through its Directors.
On 15th April 2004 the Company name was formally changed from Kinetic Finance Ltd to Athena Financial Services Ltd
Findings of the 'Special Investigation Audit' are given below
Banks completely ignored RBI guidelines on 'Fraud Reporting' and 'Initiation of Criminal Action'
As per Reserve Bank of India guidelines, since fraud was detected in the Special Investigation Audit & amount involved was more than 100 Lakhs for each bank and there were 23 Banks which were members of the Consortium, all 23 Banks should have reported the fraud to CBI and initialted criminal action against the defaulters. However it did not happen for the reasons best known to the concerned Bank officials.
1. Public Sector Banks did not initiate criminal action despite detection of fraud
Only 5 Private Sector Banks initiated criminal action
Lord Krishna Bank (10.00 Cr),
Bank of Rajasthan (4.00 Cr),
DCB Bank (12.55 Cr),
ING Vysya Bank (5.00 Cr)
J&K Bank (6.18 Cr)
(as per CIBIL & index of charges on MCA website)
2. Despite detection of fraud, following banks did not report the default in 'Willful default > 25 L' category
UTI Bank Pune (17.09 Cr),
Allahabad Bank (1.21 Cr),
Corporation Bank (1.62 Cr),
Canara Bank (IFC) Pune (9.79 Cr),
Canara Bank Pimpri (1.90 Cr),
Punjab National Bank Pune (4.65 Cr),
State Bank of India (17.21 Cr),
Bank of Baroda Mumbai (4.36 Cr),
ICICI Bank Pune (2.45 Cr),
IDBI Bank Ltd Pune (9.27 Cr),
Bank of Maharashtra Pimpri Pune (26.84 Cr)
(as per CIBIL website)
3. Some banks initiated criminal action but did not report the default in 'Willful default > 25 L' category
ING Vysya Bank (5.00 Cr),
Lord Krishna Bank (10.00 Cr)
(as per index of charges on MCA website)
4. None of the banks alerted CBI upon detection fraud in the audit report
Apparent Conclusion
All this is indicating that the Company had premeditated this big default in such a short span which is impossible without the active participation and connivance of some corrupt Public Sector Bank Officials. The funds that were Willfully defaulted upon by the Company are nothing but the 'Borrowed Public Money' and Public Sector Banks and Mutual Funds are the 'Trustees of the Public Money'. The alleged acts of fraud, dishonesty and cheating etc. cannot terminate or extinguish on the out of court OTS (one time settlements) / agreements or liquidation of the company under Civil or Company Law.
Such complaints of criminal acts must be allowed to be taken to their logical conclusions.
Prayer
It would not be, therefore, in public interest to let the defrauding Promoter Directors & the Erring Bankers go scot free. They should be subjected to a trial by a Competent CBI Court and / or SFIO so that the corporate decisions makers who are dealing with the 'borrowed public money' can understand the distinction between 'fraudulent' and faulty decision making.
Insult to injury
Despite the name of Mr Arun Firodia being continuously reported as a 'willful defaulter' from March 2005 to March 2012, he has been awarded Padma Shri in 2012. A prominent online financial journal MONEYLIFE has already reported this default
It raises serious questions on the intentions of the Govt. in curbing the NPAs created by fraudulent defaulters.
The complainant is having full evidence to support the contents of this complaint.
Sincerely
From: Sandeep Kapoor
kaps163
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1 comment:
Dear Sir,
Public Interest Litigation is being filed very soon against the perpetrators of fraud and corrupt bank officials, who by concealing fraud tried to save fraud masters.
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