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Bank of Baroda Employees disbursed Fake Gold Loans to meet Target


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According to sources, employees at several Bank of Baroda (BoB) branches in India engaged in fraudulent activities by disbursing fake gold loans. These actions violated regulatory guidelines and posed a potential risk to the funds of depositors.

Loans given without collateral and credited back as normal repayments

The loans were granted without any collateral and were later credited back to the bank as if they were regular loan repayments. This unusual method allowed the employees to meet their targets, without actually issuing or receiving any real loans.

Breaches primarily occurred at branches with gold loan shoppes

The majority of these breaches occurred at branches that housed gold loan shoppes, which are private enclosures designed to serve gold loan customers. Bank of Baroda had 1,238 such enclosures, according to a statement released by the bank in August of the previous year.

Scheme executed with the help of friendly customers

Certain Bank of Baroda employees in southern India collaborated with cooperative customers to execute this scheme. The branch would approve a gold loan and transfer the funds to the customer’s account, even without any collateral. Eventually, the money would be credited back to the bank as a regular loan repayment. To ensure that the customer did not utilize the funds, a lien would be created against the amount, effectively blocking it. This strategy allowed the employees to meet their targets without actually issuing or repaying any legitimate loans.

Processing fees paid by the branch, interest payments avoided through back-dating

To handle the loan’s processing fees and interest, the employees cited above revealed that the branch would pay the fees from its internal expense account. Interest payments were avoided by back-dating the loan repayments. By back-dating the repayments, the system would falsely record that the loan had been repaid on the same day it was disbursed, effectively reversing any interest charges.

Anomalies detected during internal audit

Bank of Baroda became aware of these fraudulent activities during the year. An internal bank document from December reported that an offsite surveillance conducted by its audit division identified anomalies in certain gold loan accounts between April and September. Specifically, the document revealed discrepancies in loans that were opened and closed within a three-month period.

Bank’s response and commitment to compliance

A spokesperson for Bank of Baroda stated that the bank regularly conducts internal audits across its various business verticals. The spokesperson acknowledged the presence of anomalies in a few gold loan accounts and emphasized that the bank promptly took corrective action to ensure compliance with established guidelines. The bank asserts that it has strong internal processes and control mechanisms in place and is dedicated to upholding the highest standards of compliance and governance.

Potential financial implications and the role of audits

Experts highlight that disbursing gold loans without collateral directly contradicts the fundamental principles of lending against collateral. If these loans were to default or if the gold ornaments used as collateral did not exist, the bank would face significant financial consequences, impacting both the bank and its customers. Surprise and regular audits act as a deterrent against potential violators, as they are aware that their actions are likely to be discovered.

7 Comments

  1. Internal auditors are always under heavy pressure from the management for classifying the branch with low risk. To avoid RBI remarks.
    Now a days auditors are not well equipped in any respect..
    Quality audit is coming down.
    No of man days are reduced with ill intension.
    Audit team should comprise from other banks with working and retired staff for actual audit process.
    Otherwise banks may go like Satyam Computers condition.
    A Mohan Rao
    9776638916
    amohanrao.764@gmail.com

  2. In most PSU Banks including SBI such practices are going on regularly, due to the pressure of Management on selling of products loan and Insurance third party product. You can find en number of mis selling of Insurance product in SBI for SBI Life. The poor BM CM will be grilled during review meetings if target is not achieved. You can find top officials, CGM GM DGM RM of every circle dancing in 3 star 4 star hotels with all sorts of entertainment dine and drink and dance with rented ladies artist along with the branch fellows who have achieved their target in mis selling of SBI life policies. In every quarter you will find celebration by SBI life with these fellow’s.called it dfreezing of tension. In this case everyone will escape except the loan sanctioning official, though BOB may have felicitated him for the achievement in Gold loan with a momento and a lunch or dinner along with some cash incentives.

  3. Now a days PSU banks become hell for employess working in branches , unrealistic targets undue pressure through frequent review meetings forcing employees to do non complied business which finally ruin the banks image , imposing penalties from regulators. Tuff actions should be initiated against circle head, zonal head, regional head if any branch of there area found doing non complied businss due to un realistic targets and due to staff shortage. This will only way to save the bank from future complications.

  4. Working in a PSU banks becoming unbearable.Higher authority in more interest to cross selling than bank’s own product. Issue a circular and complete the task befor EOD other wise day end will be restricted this is happening phenomenally in today’s PSU bank. Target should be realistic on every section other wise ensuring time the scenario will be fatal for the staff member.

  5. Management of Bank put too much pressure on field employees for fulfillment of their wishes.To avoid stress, branch does to mitigate the dying pressure from Corporate office,gold loan dept, zonal office, regional office. This type of pressure will give some more suicide of employees in future.

  6. The management is to be blamed for this ..they are putting too much pressure on branch employee to do the loans …or else they are not allowed to go home…The management should focus on good quality Loans. .

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