Banking FraudsBY:- ROHAN RANADE

CITI BANK FRAUD Retail banking unit in Gurgoan.

Rs 400 crore estimated fraud and forgery.

Main accused - SHIVRAJ PURI.

Investment of high net worth individuals.

Firm commitment of monthly returns as high as 1.5-2.5 %, or 18-30 % annually.

Fake fixed deposits receipts were issued against these investments.

Sanjay Puri- an RM at Citi Bank is accused of luring 40 HNI’s and corporate entities to invest in the bogus schemes.

Schemes falsely substantiated with a forged letter from market regulator SEBI.

The investments ranged from 15 lakhs and above.

Puri initially returned some of the money at a 20 % interest to win their trust.

HARSHAD MEHTA SCAM An Indian Stockbroker

Engaged in a massive stock manipulation scheme financed by worthless bank receipts.

Financial scandal valued at R.s 49.99 billion.

Mehta was dipping illegally into the banking system to finance his buying.

The crucial mechanism through which the scam was effected was the ready forward deal

The RF is in essence a secured short term loan from one bank to another.

The bank lends against on government securities.

The borrowing bank sells the securities to the lending bank and buys them back at the end of the period of loan at a higher price.

It was this RF deal that Mehta used in great success to channel money from the banking system.

In a ready forward deal, securities were not moved back and forth in actuality.

Instead, the borrower gave the buyer of the securities a bank receipt.

Bank receipts confirms the sale of securities and acts as a receipt for the money received by the selling bank.

It promises to deliver the securities to the buyer

Mehta needed banks which issued fake BRs (Not backed by any government securities).

Two small and little known banks – the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) – came in handy for this purpose.

Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, assuming that they were lending against government securities when this was not really the case.

This money was used to drive up the prices of stocks in the stock market.

When time came to return the money, the shares were sold for a profit and the BR was retired.

The money due to the bank was returned.

This went on as long as the stock prices kept going up, and no one had a clue about Mehta's operations.

Once the scam was exposed, a lot of banks were left holding BRs which did not have any value.

The banking system had been swindled of a whooping Rs 40 billion.

UTI SCAM The UTI scam involved the flagship US-64 scheme of UTI.

The scheme was meant to channel the funds of small investors into instruments bearing high returns.

Gradually, US-64 scheme developed an investor base of around 2 crore investors.

The UTI chairman Mr. P S Subramanyam, along with a couple of executive directors, acted wrongly to benefit powerfull brokers and industrialist.

The economic liberalisation in India.

The absolute opacity of in the operations of UTI, forced the government to announce a bailout of Rs 3,500- 4000 crores.

The reason of bailout was to prevent default in payment to the investors.

INDIAN BANK RIP-OFF 1992 The Indian bank rip-off scandal was worth Rs 1300 crores.

Aided by M. Gopalakrishnan, then the chairman of the Indian Bank.

Borrowers were mostly small corporates and expoters from south.

The borrowers never paid back.

Ketan Parekh SCAM After UTI was bailed out by the government with Rs 4000 crore, it purchased

huge bulks of manipulated shares from “PENTAFOUR BULL”

The 2001 stock market crash prompted the SEBI to inspect the books of Parekh.

The CBI arrested him on the charges of defrauding THE BANK OF INDIA of about $ 30 million.

Followed Harshad Mehta’s footsteps to swindle crores of rupees from banks.

Targeted small exchanges like the Allahabad Stock Exchange and Kolkata Stock Exchange.

Bought shares in fictitious names.

Dealings revolved around shares of ten companies like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms,  Silver line,  pent  media  Graphics and Satyam Computer.

Borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions.

Managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank. 

According to RBI regulations, a broker is allowed a loan  of only Rs 15 crore.

There was evidence of price rigging in the  scripts  of Global Trust Bank.

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