Synopsis: India’s banking sector recently reported frauds totalling nearly Rs 6,000 crore, involving branch irregularities, SREI promoter borrowing misuse, and alleged RCom fund diversion cases.
India’s banking sector has recently reported fraud totalling nearly Rs 6,000 crore over the past six months, involving alleged fund diversion, promoter-level borrowing misuse, and branch-specific irregularities. While most exposures have been fully provided for, these developments have triggered regulatory scrutiny and forensic investigations, raising broader concerns around governance standards, internal controls, and risk management practices.
This article explains the nature of these frauds, their financial and capital impact, and what they signal for asset quality, investor confidence, and sector stability going forward. Here are the 3 banks that faced fraud in recent times:
IDFC First Bank Ltd
IDFC First Bank is engaged in the business of Banking Services. IDFC First Bank is a fast-growing, new-age private sector bank, formed by the merger of IDFC Bank and Capital First in 2018. Since 2019, it has expanded its product range, including loans, deposits, and wealth management, and introduced new products like home loans, credit cards, FASTag, etc.
With the market capitalization of Rs 63,186 crore, the shares of this company closed at Rs 73.48 per share, up 0.89 percent from its previous day’s close. The shares currently trade at a fairly valued price-to-book multiple of 1.29x, reflecting balanced market expectations and stability.
Fraud: IDFC First Bank disclosed a suspected Rs 590 crore fraud at its Chandigarh branch after discrepancies surfaced during the closure of a Haryana government department account. The issue emerged when the requested transfer amount did not match the recorded balance, prompting internal scrutiny and regulatory disclosure.
The lender has suspended four officials and appointed KPMG to conduct an independent forensic audit. Management indicated the incident is confined to a single branch and described it as a physical irregularity rather than a digital systems failure, with the best-case estimated exposure at Rs 590 crore.
Financially, the amount exceeds the bank’s Rs 503 crore December-quarter profit and represents 0.21 percent of deposits and 1.2 percent of net worth. Analysts estimate a potential 18-basis-point impact on CET-1 and warn of near-term pressure on earnings, capital ratios, and deposit growth momentum.
Punjab National Bank
Punjab National Bank is a Banking and Financial service bank owned by the Government of India with its headquarters in New Delhi, India. The bank provides a comprehensive range of financial services, including: Personal Banking, Corporate Banking, Digital Banking and International Banking Catering to NRIs, importers, and exporters.
With the market capitalization of Rs 1,48,603 crore, the shares of this company closed at Rs 129.30 per share, down 0.88 percent from its previous day’s close. The shares currently trade at a fairly valued price-to-book multiple of 1.24x, reflecting balanced market expectations and stability.
Fraud against SREI Group: Punjab National Bank reported borrowing fraud by former promoters of SREI Equipment Finance Ltd (Rs 1,240.94 crore) and SREI Infrastructure Finance Ltd (Rs 1,193.06 crore). The bank has fully provided for the exposure. The disclosure enables investigative agencies to examine governance lapses, even though both entities were resolved through insolvency proceedings.
In October 2021, the Reserve Bank of India superseded SREI’s board over governance concerns, leading to insolvency action at National Company Law Tribunal under the IBC. While provisions limit direct financial damage, the fraud could influence reported asset quality metrics, including gross NPAs, slippages, and recovery trends.
State Bank of India
State Bank of India (SBI) is a premier Indian multinational public sector bank and the country’s largest commercial bank, which offers a full suite of banking, including retail, corporate, international, and investment banking, alongside subsidiaries in insurance (Life & General), mutual funds, and cards.
With the market capitalization of Rs 11,09,520 crore, the shares of this company closed at Rs 1,202 per share, down 0.60 percent from its previous day’s close. The shares currently trade at a fairly valued price-to-book multiple of 1.87x, reflecting balanced market expectations and stability.
SBI and Rcom Fraud: Bank of India classified the loan account of Reliance Communications as fraudulent, naming former director Anil Ambani. The decision relates to a Rs 700 crore loan sanctioned in 2016, where part of the disbursed funds was allegedly diverted into fixed deposits, violating agreed loan conditions.
Earlier, the State Bank of India had taken similar action, alleging misappropriation involving Rs 2,929 crore. Based on SBI’s complaint, the Central Bureau of Investigation registered a case and conducted searches at premises linked to the company and Ambani as part of its probe.
RCom’s account became non-performing in June 2017, with dues exceeding Rs 724 crore to Bank of India. The company, carrying overall debt above Rs 40,000 crore, is undergoing insolvency proceedings. Under banking norms, a fraud classification restricts future borrowing and mandates referral to investigative authorities.
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