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Top Financial Scams in India

Financial fraud is the major type of cybercrime in India. The value of online financial frauds rose twofold last year, highlighting the lack of coordination between different local regulatory bodies on tackling cyber financial scams. Here are the most outrageous scam cases that recently occurred in India. 

Top Financial Scams in India

A recent survey has shown that about one-fourth of the Indian families have experienced financial fraud in the last three years. The types of financial scams they faced range from credit/debit card fraud to e-commerce scams. Other kinds of fraudulent schemes registered in India include Ponzi schemes, social media scams, QR code scams, corporate frauds, and more. 

Sanjivani Credit Cooperative Society Scam (Rs 953 crore, 2019)

The ongoing investigation is still struggling to discover all the details and return money to the victims of the Sanjivani corporate scam case in Rajasthan. 

The Sanjivani Credit Cooperative Society was registered in 2008 under the Rajasthan Societies Act but later changed into a Multi-State Cooperative Society. In 2019, the authorities received complaints against Sanjivani and arrested six office bearers of the society.

Allegedly, the entity defrauded as many as 146,991 people of over Rs 900 crore by forging account sheets, payment records, investor signatures, and annual transactions. At the same time, the numbers are approximate since fresh First Information Reports (FIRs) were filed in this case last year. 

If proven, the scam would be labelled a Ponzi scheme and a corporate scam. However, at present, the investigation is hindered by political debates as one of the Union Ministers is also accused of being involved in the scheme. 

Nirav Modi – PNB Scam (Rs 11,000 crore, 2018)

Companies owned by diamond merchants Nirav Modi and Mehul Choksi allegedly swindled Punjab National Bank (PNB) of over $1.77 billion. The fraudulent actions started back in 2011 when the first fake Letters of Undertaking (LoU) were issued on behalf of PNB to offset the payment in case the actual borrower (Nirav Modi) failed.

As alleged, two PNB employees were involved in the scheme, multiplying the LoUs and asking other banks to give out fresh loans to the given firms. Eventually, overdue loans piled up and exceeded Rs11,000 crore. Lack of technology and fraud monitoring policies applied by the bank contributed to the long-term character of the fraud. 

Although Modi and Choksi had left the country before the alleged scam came to light, Modi was arrested in 2019 in London. He has repeatedly denied the charges and has been fighting extradition to India ever since.

In late 2023, the court directed that 18 properties valued at over Rs 71 crore, linked to Modi and his firms, be released in favour of the bank and liquidators.

Chinese Investment Fraud (Rs 712 crore, 2023)

A recent incident in Hyderabad revealed a fraudulent investment scheme performed by Chinese operators based in Dubai. The police arrested nine individuals and froze assets worth over Rs 10.53 crore while investigating the scam offering Indian citizens part-time jobs of ‘rate and review’.

Victims were suggested to register on a dedicated website to perform easy review tasks and earn some extra money. However, the job required an initial investment from the applicant. Soon the victims discovered they were unable to withdraw the earnings and contacted the police. It appeared that the job applicants’ money was divided among a few fraudulent accounts (in both fiat and crypto). 

Currently, online frauds targeting individuals seeking part-time employment and extra cash are witnessing a rise, due to increasing inflation and unemployment rates.

 

Saradha Chit Fund Scam (approx. Rs 30,000 crore, 2013)

One of the largest financial scams in the history of India has lasted almost a decade between 2003 and 2011, finally collapsing in 2013. The scam affected millions of investors, primarily in West Bengal, Assam, Odisha, Jharkhand, and other eastern states of India. Despite investigations, led by the CBI and the Enforcement Directorate (ED), the total amount lost by investors is still unknown but has been estimated to be over Rs 30,000 crore.  

The scam involved a few companies including the Saradha Group and the Rose Valley Group who promised unrealistically generous returns to investors. The Saradha Group and its network of fraudulent companies collected deposits from investors under various investment schemes, e.g. chit funds, real estate projects, and media ventures. 

However, instead of investing the funds in legitimate businesses or ventures, the group used the money from new investors to pay returns to earlier investors. Leveraging multiple brand names and diversifying into multiple sectors allowed the group to conceal its fraud for a long while. 

When the scam was exposed after the group defaulted on payments to depositors, widespread protests started. Legal investigations led to the arrests of key individuals associated with the group, including its chairman Sudipta Sen and several politicians and business leaders.

Rotomac Pens Fraud (Rs. 3,700 crore, 2018)

The Rotomac Pens fraud highlighted the risks associated with corporate defaults and financial mismanagement. The notorious pen-maker availed loans from multiple banks for its business operations but failed to repay the borrowed funds. Allegedly, the borrowed funds were used for personal gain or other unauthorised purposes.

The public sector banks involved include Bank of Baroda, Bank of India, and Allahabad Bank. In 2022, it also came to light that the Indian Overseas Bank issued 11 Letters of Credit (LC) to meet the company’s foreign trade requirements, which resulted in a non-performing asset of ₹ 743.63 crore. The forensic audit conducted by the bank pointed to alleged manipulation in account books and non-disclosure of liabilities arising from LCs. It also found irregularities in sale contracts, bills of lading and corresponding voyages.

Top Financial Scams in India

Financial Fraud Landscape in India Is Much Wider

Lately, India has seen a surge in novel financial scam cases. Although the number of truly large-scale frauds may be small, every day thousands of people in India lose their money to scammers. 

In the fiscal year 2023, the Reserve Bank of India (RBI) documented banking fraud incidents exceeding 302.5 billion rupees. The regulator even issued a warning regarding the increased risk of cyber fraud in the financial year 2023.

The number of frauds in the banking sector during the H1 ‘24 has increased substantially to 14,483 cases, according to another RBI report. The surge is evident compared to 5,396 cases in the same period a year ago. 

UPI Scam

Among the most pervasive financial scams in India, there’s the UPI scam, accounting for 55% of all digital payment frauds in India. UPI-related frauds range from disguising collect requests as fraudulent cashback offers to creating spoofed VPAs for refunds and disaster support. 

In the fiscal year 2022–2023, reported UPI fraud cases exceeded 95,000, compared to the 84,000 cases reported in 2021–2022. The cumulative loss attributed to UPI fraud, bank frauds, and email scams, exceeded INR 200 crores in 2023. 

Online Banking And Credit Card Fraud 

Phishing attacks, identity theft, and fraudulent transactions utilising pilfered card details occurred 13,530 times in the fiscal year 2023. Nearly half of the cases were attributed to the digital payment category. 

In 2022, the state of Bihar in India had the highest number of credit and debit card frauds, with approximately 562 cases registered with the authorities. The country in general recorded over 1.6 thousand cases of credit and debit card frauds that year. 

QR Code Fraud

QR code scams are surging in India, as fraudsters lure victims into scanning fraudulent QR codes, stealing funds from their bank accounts. For instance, Bengaluru police statistics revealed that 41% of the 50,000+ reported cybercrime incidents in the city were attributed to QR code scams. 

General Bank Frauds

Bank frauds like loan frauds, cheque frauds, forged documents, and unauthorised transactions exceeded Rs 3,500 crore in the fiscal year 2023. Although the total value of frauds has seen a decline in the past two years, the surge in digital banking and e-commerce fraud may account for the seeming decrease. 

What Is Being Done to Prevent Fraud in India?

Both alarming high-profile financial fraud cases and thousands of smaller cases that bring aggregate losses of billions of rupees each year signal that India needs stronger anti-fraud measures. Moreover, the diversification and sophistication of newly emerging scams requires continuous vigilance from regulators, financial institutions and consumers.

India has taken several measures to strengthen its fraud-prevention policies and enhance regulatory oversight in recent years. The country has enacted and amended laws, including the Prevention of Money Laundering Act (PMLA), the Benami Transactions (Prohibition) Act, and the Insolvency and Bankruptcy Code (IBC), to enhance the legal framework for combating financial fraud and white-collar crime. 

Regulatory authorities have also adopted risk-based supervision approaches to assess and monitor the risk profiles of banks, financial institutions, and other relevant entities. It has also imposed money-laundering provisions on cryptocurrency service providers, placing restrictions on foreign crypto exchanges not registered with local authorities, including Binance.

Local financial institutions are also increasingly adopting innovative blockchain technology, advanced data analytics, artificial intelligence (AI), machine learning, and other high-tech tools to detect, analyse, and prevent fraudulent activities more effectively, enhance surveillance capabilities, and strengthen cybersecurity defences.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.