DENA BANK, OBC HIT BY RS 436CR FRAUD

MUMBAI (TIP): The banking industry has been shaken by the discovery of a fixed deposit scam where Dena Bank and Oriental Bank of Commerce (OBC) are the latest victims to be defrauded of over Rs 256 crore and Rs 180 crore, respectively. The finance ministry has ordered a forensic audit in these state-owned banks where proceeds of institutional fixed deposits were diverted on the basis of forged documents.

Both the banks have complained to the Central Bureau of Investigation (CBI), which is looking into the matter. Speaking to newspersons in Mumbai on Wednesday, finance secretary G S Sandhu said the government has ordered disciplinary action to be taken against those who are held accountable in the fixed deposit scam and the banks have already suspended a few officials.

Dena Bank shares closed 5% down while the OBC stock lost nearly 3.5% by close of Wednesday’s trade on the BSE. In a statement issued here, Dena Bank said that its Malabar Hill Branch received bulk term deposits from various entities and government organizations between January 30, 2014, and May 5, 2014. Subsequently, term deposits amounting to Rs 256.69 crore were pledged to the bank by the same signatories who placed the fixed deposits and the pledge was used to obtain overdraft facilities of Rs 223.25 crore. The funds were then surreptitiously transferred out of the bank.

The modus operandi was similar in the case of OBC too. The Jawaharlal Nehru Port Trust (JNPT) had opened a fixed deposit with the bank by remitting Rs 110 crore through an electronic transfer in February this year. The deposit was followed by a faxed request to transfer the funds to the current account of a third-party — Padmavati International. The bank then received a second transfer of Rs 70 crore from JNPT followed by another request to transfer funds to the current account of Padmavati International.

The bank subsequently received enquiries from the port trust about non-receipt of the term deposit certificate. Investigations by the bank showed later that the branch had transferred funds received to the third-party account directly based on the fax request. Upon detecting the fraud, the bank took measures to recover the money from the third-party account and seized Rs 110 crore lying with other banks even as Rs 64 crore remained untraced.

Banking sources said the bulk deposits were brought in by middle-men and their role in the fraud is being looked into. Speaking to newspersons, Ashwani Kumar, chairman, Dena Bank, said that the bank has filed a complaint and kept the regulator informed. Kumar said that the bank plans to make provisions for Rs 218 crore for possible losses arising out of the fraud. He said that the bank has already provided for Rs 54 crore in the first quarter and the rest of the amount would be provided for during the course of the year.

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