Money & Banking

Avoid middlemen to source deposits in view of frauds in banks: Canara Bank's alert to branches

K Ram Kumar Mumbai | Updated on June 14, 2020 Published on June 14, 2020

Banks would do well to avoid middlemen who canvass bulk deposits from organisations/ individuals as they could fall prey to fraud, going by Canara Bank’s alert to its branches and controlling offices.

The Bengaluru-headquartered public sector bank recently drew attention of its branches/ circle and regional offices to two high value frauds that took place in the banking system vis-a-vis bulk deposits of government organisations in the last six-seven months. The amounts involved were Rs 47 crore and Rs 100 crore.

Elaborating on the reported modus operandi, the Bank, in an inter-office memorandum, said a branch in Bengaluru got a lead for canvassing a bulk deposit of Rs 100 crore from a government organisation. The branch got the Controlling Office’s permission to accept the deposit at the card rate.

After confirming the interest rate for one year and one day, an amount of Rs 100 crore was transferred from another bank on November 18, 2019.

Opening current account

Immediately after receipt of the amount, a person purported to be the Accounts Officer (Finance) approached the branch with a letter to open a fixed deposit of Rs 50 crore and a current account for crediting the balance amount of Rs 50 crore.

Required documents for opening the current account, including KYC (know-your-customer) documents were also submitted.

After the amount was credited in the current account, the Accounts Officer (Finance), who was the authorised signatory to the said current account, transferred/ remitted to individual/ firms at various bank branches of Axis Bank, Canara Bank, ICICI Bank, Indian Overseas Bank located in Chennai through 97 RTGS of Rs 48,62,500 each amounting to Rs 47.17 crore during the period November 20 to December 5, 2019, the Bank’s alert said.

The fraud came to light when some other middlemen approached the branch to arrange another Rs 250 crore bulk deposit with similar request for opening of fixed deposit and current account followed by remittances from current account.

When the branch got suspicious and enquired with the organisation, it was informed that no instruction was given to open current account and that they have received two Fixed Deposit (FD) receipts of Rs 50 crore each.

During investigation, it came to light that the FD receipts were not genuine. The documents submitted to open the current account were fake/ fabricated.

The Bank observed that a similar type of fraud of about Rs 100 crore took place in April 2020 in Chennai in another Bank.

Referring to the aforementioned fraud incidents, the Bank told its circle/ regional offices and branches that: “Wherever permission is given for bulk deposits, please ensure that the deposit is made for the same amount and period requested. Branches should be advised to avoid middlemen for securing deposit.”

About six years back, erstwhile public sector banks -- Dena Bank (merged with Bank of Baroda with effect from April 1, 2019) and Oriental Bank of Commerce (merged with Punjab National Bank with effect from April 1, 2020) -- had reported similar frauds of bulk institutional deposits being diverted.

The amounts involved in the case of Dena Bank and Oriental Bank of Commerce were Rs 256 crore and Rs 180 crore, respectively.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on June 14, 2020
This article is closed for comments.
Please Email the Editor