ABG shipyard case: Are bank frauds now part of the system?
Are we destined to live with bank frauds? From the relentless numbers, it appears defrauding of banks has become endemic. The latest shocker is the case of ABG Shipyard, a company under liquidation, which along with its CMD Rishi Kamlesh Agarwal have been booked for defrauding a consortium of banks of over Rs 22,000 crore. The case has been investigated since November 2019, but the CBI has only now filed an FIR against the company and its directors. Billed as India’s biggest bank fraud, the company was sanctioned credit facilities from 28 banks. A forensic audit for the 2012–17 period revealed that the directors colluded to commit illegal acts including diversion of funds, misappropriation and criminal breach of trust.
Since it is a big heist, ABG Shipyard has caught the eye. What is not known is how prevalent this form of thievery is. Digital transactions have only made things easier. India saw 229 bank frauds in a day, or 83,638 criminal cases in FY 2021, with as much as Rs 1.38 lakh crore being siphoned off in a year. Tragically, just over Rs 1,000 crore has been recovered.
If one studies the milestones of bank frauds, two things stand out. First, the biggest frauds are perpetrated by those who draw loans for running what seem to be respectable businesses. Second, frauds are only possible with layers of collusion by bank officials. In the case of Bhushan Steel, when the promoter and MD Neeraj Singhal was arrested for siphoning off Rs 2,000 crore, the spotlight turned on bank officials of SBI, UCO Bank, and Punjab National Bank. In the Nirav Modi case, where over Rs 10,000 crore was siphoned out for supposedly financing import of pearls, officials of PNB’s Brady House branch in Mumbai collaborated in the crime. In the ABG Shipyard case, similar questions remain unanswered. Why was no action taken when there were warning signals as far back as 2016? Why has it taken the police five years to file an FIR after the company liquidation began in 2016? Unfortunately, we begin to shut the barn doors after the horse has bolted.