India’s biggest banking fraud at ABG Shipyard – nearly double the scale of the 2018 scam involving diamantaire Nirav Modi – has once again exposed the vulnerabilities in India’s banking system.
A lack of regulation, flawed lending policies and an inefficient fraud monitoring mechanism are among the factors that have frequently led to instances of fraud and a rise in non-performing assets.
In the past few years, the Reserve Bank of India and the central government have taken steps to resolve the industry’s pain points, but clearly not enough.
A shift towards digital banking and limited use of technology to detect loopholes, especially at a time when the Covid-19 pandemic has forced employees to work from home, have increased the need for concerted efforts by authorities to prevent mishandling of public money.
What happened?
On February 14, the Central Bureau of Investigation booked Gujarat-based ABG Shipyard, India’s largest private shipbuilding company, and its former chairman and managing director Rishi Kamlesh Agarwal, along with others, for allegedly cheating a consortium of 28 banks of Rs 22,800-crore.
The company is alleged to have diverted funds to make investments in overseas subsidiaries and transferred money to several related parties. The Central Bureau of Investigation has charged ABG Shipyard of misappropriation of funds and criminal breach of trust.
While this was an issue involving the end-use of the loan disbursed, the Modi fiasco involving…
