Why ED probe into Patna bank fraud is significant
The agency’s investigation into defrauding of government funds by an ex-bank manager could reveal various layers of the scam
With the Enforcement Directorate (ED) in July last week completing custodial interrogation of Sumit Kumar, a former branch manager of Kotak Mahindra Bank in Patna, for alleged money laundering and fraudulent withdrawal of government funds, the ongoing investigation holds the potential of revealing various layers of bank frauds committed with the connivance of officials.
The ED has initiated investigation into a case involving 13 fraudulent transactions in which Rs 31.93 crore were siphoned off from government accounts between November 4 and December 15 in 2020. The agency took up the case on the basis of an FIR registered by the Patna police.
The amount in question was illegally transferred from the bank accounts of the Competent Authority for Land Acquisition cum District Land Acquisition Officer (CALA cum DLAO), Patna. These funds belonged to the National Highways Authority of India (NHAI) and were parked in the DLAO bank account for acquiring land for government projects.
The money was allegedly siphoned off using forged authorisation to transfer government funds to fake beneficiaries. The investigations have also zeroed in on Nita Singh, wife of Sumit Kumar, as one of the primary beneficiaries of the scam. Nita’s account, as per investigations, had been credited with Rs 9 crore since July 2019—when it was opened by Sumit Kumar in his capacity as branch manager—and the transactions appeared to be of the nature of money laundering.
While Kotak Mahindra Bank’s head office had sent a money laundering alert in September-October 2019 regarding Nita’s account, the bank failed to spot that Sumit’s personal email ID was also the email ID registered in her account. The same email ID had been used to forge the Aadhaar card of Patna DLAO Pankaj Patel, the authorised signatory of the account.
Though the Bihar police has already cracked the case to the extent of arresting and unmasking the alleged conspirators, the ED investigation can certainly widen the scope of the probe. Also, the ED’s findings can not only point out specific lapses but also make those who failed in their job pay for their lapses and bear the legal consequences of it.
The fraud was unearthed by Kotak Mahindra Bank officials when a person, Subham Kumar Gupta, reached the branch at Patna’s Exhibition Road on January 2, 2021 to withdraw/ transfer Rs 11.73 crore, using a forged letterhead of the NHAI and a counterfeit Aadhaar card of Patna DLAO Patel. Suspicious bank officials called the police and Gupta was arrested. The bank checked its records and found that Rs 32 crore had already been swindled from the same account in 2020. The facts raised a question mark over the bank’s internal check and balances as the fraud had remained undetected for weeks until Gupta’s arrest in January 2021.
The investigations have also revealed that Sumit Kumar, in connivance with his accomplices, allegedly managed to get the funds transferred from the accounts of CALA cum DLAO without the knowledge of the signatory by forging documents and also signatures on the RTGS forms. He allegedly misused his position in getting the payments cleared without due verification.
Further, analysis of the bank accounts in the name of Sumit Kumar and his wife revealed transactions running into crores, which are allegedly disproportionate to their sources of income and inconsistent with their profiles.
The Patna case is just one of the thousands of bank frauds committed every year in India. The RBI’s annual report for 2022-23 notes that 13,530 cases involving fraud to the tune of over Rs 30,252 crore were recorded in the financial year—an average of 38 cases a day. While the amount defrauded has considerably reduced—from Rs 1.32 lakh crore in 2020-21 to Rs 30,252 crore in 2022-23, the number of cases has almost doubled, from 7,338 cases in 2020-21 to 13,530 cases in 2022-23.
An assessment of bank group-wise fraud cases over the last three years indicates that while private sector banks reported maximum number of frauds, public sector banks continued to contribute maximum to the fraud amount during 2022-23. Private banks accounted for Rs 8,727 crore worth of fraud while public sector banks accounted for frauds worth Rs 21,125 crore.
Investigators who have probed the trend of cheque frauds admit that the majority of these are related to bank accounts of government institutions, such as schools, colleges, departments and societies, since their account statements are unlikely to be checked regularly. Also, such accounts are flush with funds and can net big sums if the fraudsters succeed in their modus operandi.
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