Banking Scams in India



The regulator of banks in India, Reserve Bank of India (RBI) defines banking scams as;

“A deliberate act of omission or commission by any person, carried out in the course of banking transaction or in the books of accounts maintained manually or under computer system in banks, resulting into wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the bank.”

There has been a vigorous growth in the banking sector since the liberalization of the economy in the early 1990s. However, with these changes, every passing day we can hear the news of various banking frauds and unethical practices. It is been observed that most of the frauds occur in private and foreign sector banks.

But, ever wondered what’s the reason behind these scams?


It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”- Henry Ford

STATISTICS – What Numbers have to Say?

  • The number of fraud cases in ICICI bank was around 455 across the country followed by SBI with 429 and HDFC Bank with 237 bank fraud cases.
  • The number of ATM and net banking frauds in the 2016 financial year amounted to about 12,000. This was an increase from about 8,800 in the fiscal year 2013.
  • In the financial year 2017, banks reported 12,533 cases of fraud leading to losses of Rs. 18,170 crores according to a report by Institutional Investor Advisory Services, a proxy advisory firm.


  • The credit or debit card and internet banking related frauds in Maharashtra in the fiscal year 2017 was reported to be approximately 121 million Indian rupees.
  • In the fiscal year 2018, 6,000 fraud cases were reported leading to a total loss of more than Rs. 30,000 crores according to the financial stability report (FSR) released by RBI on June 26th,2018.


  • In February 2018, India’s largest banking scam of nearly $2 billion was unearthed at Punjab National Bank, the country’s second-largest PSB.
  • A recent RBI report reveals that fraudsters looted around Rs. 41,167 crores from the banking system in the FY 2017-2018, a sharp rise of 72% over the previous FY.

DESCRIPTION – Let’s take a Deep Dive

You might be very well aware of the renowned diamond merchant Nirav Modi and the latest banking scam in India done by him.

Recently exposed Nirav Modi defaulted country’s second largest public sector bank PNB with Rs. 11,400 crore and managed to flee away from the country.


Not only Nirav Modi; Mehul Choksi, Vijay Mallya, Nilesh Parekh, Bipin Vohra, Kishor Kharat, etc were also found responsible for some of the biggest in banking scams in India which caused a huge loss to the banking sector.


Reasons behind banking scams in India:

  • Inadequate supervision of the top management members
  • Faulty incentive mechanism in place for employees
  • Corporate borrowers and third-party agencies involvement
  • Illegal agreements between the staff members


  • Lack of technologies to detect frauds and scams in the early stage
  • Lack of awareness of bank employees and customers
  • Weak regulatory system


Well, it is impossible to stop banking scams. We can’t have a check on every step and procedure but, it can be prevented. Yeah! Prevention is better than cure.


  • New technologies can be introduced to record all the banking transactions
  • training must be given to the bank staffs to upgrade their awareness
  • the audit reports must be shared with RBI


  • SWIFT-CBS should be made compulsory for all LoUs (Letter of Undertaking)
  • The banking system must be checked regularly
  • Everything must be transparent
  • Customers must be made aware that any OTP, passwords or User Id should not be shared with anyone to avoid mobile banking scams


  • Nowadays, everything is going cashless. Transactions are done online. So, hackers take advantage of it and hence e-money theft and frauds are increasing.
  • The country’s economic growth gets affected.


  • When farmers are unable to repay their loans, their property is seized and as a result, they commit suicide. However, if any big authorities fail to repay their loans, banks convert them into loss assets. Hence, results in a huge loss of public money.
  • The fraudsters run out of the country and none of them gets arrested. This leaves a bad impact on society.


  • The taxes paid by the public is utilized in the recapitalization of banks rather than the country’s welfare activities.
  • It becomes difficult to take loans from banks.


Bank fraud is not a subject that any of the banks would like to deal with, but the reality is that every organization experiences fraud to some degree. Hence, fraud detection becomes an important aspect of reducing losses. Bank’s monitoring systems must work effectively for efficient incident handling and remediation processes.


Author – Riya Chandra

Must Explore

How to crack Group Discussion?

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also
Back to top button