Even as the country continues to reel under one banking scandal after another, we have now encountered one of the biggest frauds. The investigative agencies suspect that the Bank of Baroda (BoB) has played a crucial role in facilitating this Rs 34,615-crore banking fraud. The Central Bureau of Investigation (CBI) has booked a senior official of Bank of Baroda (BoB), its former Deputy General Manager, Satyendra Dubey, and two others for their alleged involvement in an unauthorized loan recovery process that led to a wrongful credit entry of Rs 3,80,18,961 in the system. This is not the first time when Bob has been embroiled in bad loans. In September this year and earlier, too, media reports have disclosed how BoB's loan exposure to some companies was way above the regulatory threshold. These are some essential details related to this scam:
What is the scale of this fraud?
The CBI has estimated that the total amount involved in this "bad-loan scam" is Rs 34,615 crore. The agency has already written off an amount of Rs 8,800 crore in its FIR. The remaining "bad-loan" amount of Rs 25,805 crore is expected to be "substantiated" by the Bank during the investigation. The investigative agencies claim they have evidence of involvement of two subsidiaries of the private company based in Gujarat, First Sterling Financial Services Private Limited and First Financial Management Private Limited. Non-existent or other companies availed the dubiously funded loans from BoB in the garb of an earlier firm, the Future Generali Insurance Company Ltd.
CBI suspects UCO Bank facilitated this scam
The Central Bureau of Investigation (CBI) suspects that UCO Bank might have used its employees to facilitate this amount. It investigates the role of UCO Bank's senior officer and former Deputy General Manager, K.V. Dubey, in this matter. The CBI has alleged in its FIR that the Bank officials have violated the banking norms. The FIR alleges that Dubey instructed the BoB officials to release the money even though the "documents were forged and lacked authenticity." Dubey was General Manager at the UCO Bank.
17 banks are said to be hit by this fraud
The CBI FIR reveals that a consortium of 17 banks, including State Bank of India, Corporation Bank, and Indian Overseas Bank, is said to be hit by this fraud. It is suspected that the total amount involved in this fraud is Rs 34,610 crore. It is alleged in the FIR that the banks have been affected due to the "wrongful credit entry in their books of account." The CBI also suspects that the UCO Bank has played a crucial role in facilitating this "bad-loan scam." The investigative agencies claim that the "bad loans" were availed in the garb of an earlier firm, the Future Generali Insurance Company Ltd.
Who has lost how much in this fraud?
The CBI has alleged in its FIR that the Bank officials have violated the banking norms and "wrongful credit entry in their books of account." The CBI suspects that the UCO Bank has played a crucial role in facilitating this "bad-loan scam." The investigators have also alleged that the Bank officials have caused "wrongful loss to the public." They have also said that the public is "likely to suffer harm." The investigative agencies have said that the "affected banks" have lost an amount of Rs 8,800 crore in this fraud. They have further noted that the "public at large" is "likely to suffer harm" due to the banks' loss.
How was this fraud facilitated?
The CBI has alleged in its FIR that the Bank officials have violated the banking norms. The Bank officials might have used "forged documents" while extending loans to the companies and were "involved in the process of recovering the loan, and the credit entry in their books also happened in the same way." The CBI suspects that the UCO Bank has played a crucial role in facilitating this "bad-loan scam." The CBI suspects that the UCO Bank might have used the officials of the two companies to reduce this amount. First Sterling Financial Services Private Limited and First Financial Management Private Limited are the two companies. The CBI has alleged in its FIR that the firms did not give any "security" for the amount that was availed as a loan from the Bank.
The question of responsibility
According to the investigators, the Bank officials might have violated the banking norms. They might have "misused their position" and "fudged the documents." The investigators have alleged that the Bank officials have caused "wrongful loss to the public." The investigative agencies have said that the "affected banks" have lost an amount of Rs 8,800 crore in this fraud. The investigative agencies have also noted that the "public at large" is "likely to suffer harm" due to the banks' loss. According to Section 3 of the Indian Penal Code, a person has to commit an offense if he/she has "misused his position" and has "caused wrongful loss to the bank or the public at large."
Summary
The CBI has alleged in its FIR that the Bank officials have violated the banking norms, and they might have "misused their position" and "fudged the documents." The investigators have alleged that the Bank officials have caused "wrongful loss to the public." The investigative agencies have said that the "affected banks" have lost an amount of Rs 8,800 crore in this fraud. They have also noted that the "public at large" is "likely to suffer harm" due to the banks' loss. This is one of the most extensive banking frauds that the country has witnessed. The investigators have alleged that the Bank officials might have violated the banking norms. They might have "misused their position" and "fudged the documents." The author is Research Associate at, Institute for Defence Studies and Analysis.
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