含羞草社区

Banking frauds are on the rise, both in terms of number of frauds and the value involved. A disquieting increase in frauds has been observed in the retail segment – housing and mortgage loans, credit cards, internet banking, etc. – while frauds in the traditional areas of banking, such as cash credit, export finance, guarantees and letters of credit, have not abated.

In view of earlier concerns expressed by the Central Vigilance Commission and Central Bureau of Investigation, banks were advised in January 2004 to constitute a special committee of their board of directors to monitor and follow up frauds involving amounts of ?10 million (US$200,000) and above. While the banks have adopted certain policies and processes in this regard, they are not well structured and systematic to ensure proper focus on typical fraudulent activities.

The reported frauds show recurrence or a rising trend in the following areas: loans and advances against hypothecation of stocks; housing loans; submission of forged documents including letters of credit; inflating the overall cost of a property to obtain a higher loan amount; overvaluation of mortgaged properties at the time of loan approval; grant of loans against forged fixed deposit rates; over-invoicing of export bills resulting in concessional bank finance and exemptions from various duties; etc.

Shardul Thacker is a partner at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.