From Choksi to Mallya: India’s Top 5 Bank Fraud Cases Explained

Fugitive diamond businessman Mehul Choksi, former chairman of Gitanjali Group, has been arrested in Belgium by local authorities following a request from India’s Central Bureau of Investigation (CBI). 

Choksi is also well remembered for his accused role in the Punjab National Bank (PNB) fraud case, in which he and his nephew Nirav Modi were accused of cheating the bank of more than Rs 13,000 crore through fraudulent transactions.

India has experienced several major bank frauds which have not only shaken the banking sector but also brought into focus the necessity for tough regulation policies. Below are five major bank frauds that have left an indelible mark.

1. ABG Shipyard Scam – Rs 22,842 Crore

The ABG Shipyard bank fraud, rated as one of India's largest, was that of the theft of around Rs 22,842 crore from a group of 28 banks led by ICICI Bank and State Bank of India. The scam ran from 2012 to 2017, wherein funds were purportedly diverted using layered transactions and shell firms. SBI's fraud detection committee had, in June 2019, submitted a report identifying ABG Shipyard as a fraud company. 

ABG Shipyard scam is one of India's biggest bank scams. The firm reportedly cheated a group of banks, including ICICI Bank, by misusing funds and redirecting loans for individual purposes. The Central Bureau of Investigation (CBI) has been probing the case, which has questioned the efficacy of credit surveillance in bulk lending.

2. Nirav Modi and Mehul Choksi – Rs 13,000 Crore 

In 2018, diamond traders Nirav Modi and Mehul Choksi were accused of perpetrating a massive fraud against Punjab National Bank (PNB). They reportedly acquired unauthorized Letters of Undertaking (LoUs) to get overseas credit, resulting in huge losses for PNB.

The latest developments involve auctioning properties owned by Choksi's company, Gitanjali Gems, as the authorities try to recover the amount that was defrauded.

Also Read: Who is Mehul Choksi, Why Was He Arrested in Belgium, and How Did the Rs 13,850 Crore PNB Scam Unfold?

3. Vijay Mallya – Rs 9,000 Crore 

Business tycoon Vijay Mallya's Kingfisher Airlines defaulted on loans of around Rs 9,000 crore from Indian banks. Mallya left India for the UK in 2016, and India has yet to bring him back despite attempts at extradition. The case highlights difficulties in recovery of dues from high-profile defaulters and has raised debate on structuring loan disbursement norms.

4. Satyam Computers Scam – Rs 7,800 Crore

In 2009, the founder of Satyam Computers, Ramalinga Raju, admitted to falsifying the accounts of the company by Rs 7,800 crore, which is one of the largest corporate frauds in India. The scandal prompted a reassessment of corporate governance norms and the adoption of more stringent regulatory mechanisms to avert such events.

5. PMC Bank Scam – Rs 4,355 Crore

The Punjab and Maharashtra Cooperative (PMC) Bank scam was about the officials of the bank hiding non-performing assets and lending to the defunct real estate company HDIL. The scam was discovered in 2019, involving thousands of depositors and prompting regulatory actions to protect the account holders' interests.

These cases indicate structural weaknesses in India's banking system, pointing to the need for stricter oversight, transparency, and accountability to avoid similar financial scandals.