Corporate 'fraud accounts' pose tough challenges for banking system

Indian banks are grappling with several prominent fraud accounts with banks such as State Bank of India (SBI) classifying Reliance Communications (RCom) under this category. 

SBI also reported former chairman of the group Anil Ambani to the Reserve Bank of India (RBI). 

In a reply to SBI via his law firm, Ambani said the action was taken ex parte and in violation of natural justice. 

Most of the earlier prominent fraud cases are under litigation. 

Here are the prominent ones:  

Bhushan Power and Steel: One of the biggest banking frauds in India came to light in the case of Bhushan Power and Steel Ltd. It was recently in the news after the Supreme Court overturned its acquisition by JSW Steel and ordered its liquidation. 

According to the Enforcement Directorate (ED), the company's former promoter Niraj Singal was allegedly involved in a massive banking fraud that caused a loss of over ₹46,000 crore to public sector banks (PSBs). 

The ED has accused Niraj Singal and his father Brij Bhushan Singal — former promoters of Bhushan Power and Steel — of operating a network of over 150 shell companies to divert funds from their now-insolvent firms. 

The agency claims this resulted in financial losses of ₹11,446.73 crore, which it categorises as proceeds of the crime. The case remains sub judice and Singal remains out on bail from the Supreme Court. 

Gitanjali Gems/Nirav Modi: Mehul Choksi, former chairman of Gitanjali Gems, remains in custody in Belgium after his arrest in April following an Indian extradition request. 

Along with his nephew Nirav Modi — currently jailed in the UK — Choksi fled India just before a massive loan fraud involving PSBs surfaced in 2018. 

According to the ED, Choksi colluded with Punjab National Bank (PNB) officials to fraudulently obtain letters of undertaking between 2014 and 2017, causing a loss of ₹6,097 crore. He also defaulted on loans from ICICI Bank. 

Nirav is separately under probe by the Central Bureau of Investigation (CBI) for alleged PNB frauds totalling over ₹11,000 crore. The cases are sub judice. 

DHFL: Dewan Housing Finance Corporation Ltd (DHFL), once a leading housing finance company in India, became the centre of one of the country’s largest financial scandals, involving over ₹34,926 crore.  

Between January 2010 and December 2019, a consortium of 17 banks extended credit facilities worth ₹42,871 crore to DHFL.

According to investigative agencies, the company’s former promoters — Kapil and Dheeraj Wadhawan — diverted a large portion of these funds to shell entities, referred to as “Bandra Book Entities.” It was done through a network of fake borrowers and dubious transactions. The matter is subjudice. Following insolvency proceedings, DHFL was acquired by the Piramal Group under the Insolvency and Bankruptcy Code. 

IL&FS: Infrastructure Leasing & Financial Services (IL&FS), once a major player in infrastructure development and finance, triggered a systemic crisis after defaulting on its debt obligations. 

The Serious Fraud Investigation Office (SFIO) and the CBI launched probes into alleged financial irregularities, including fund round-tripping and questionable loan disbursements. Some cases reportedly involved high-profile individuals. 

According to a status report filed in April 2025 with the National Company Law Appellate Tribunal (NCLAT), the IL&FS group has resolved 197 entities and discharged ₹45,281 crore to creditors as of March 2025. 

It marks a significant milestone in the resolution process. 

ABG Shipyard: ABG Shipyard’s loan account was classified as a non-performing asset on November 30, 2013, according to SBI. 

According to a bank’s complaint to the CBI, total outstanding dues amount to around ₹22,842 crore. The bulk of the disbursements were made between 2005 and 2012 by a consortium of 28 banks, led by ICICI Bank and including SBI, the CBI revealed. 

In November 2023, the CBI filed a charge sheet against ABG Shipyard and 24 others, including former chairman and managing director Rishi Aggarwal. The matter is sub judice.