The Central Bureau of Investigation (CBI) has launched an investigation into an alleged ₹255.74 crore bank fraud case involving a construction and trading company. The probe was initiated following a complaint from the Bank of Baroda (BoB), which reported irregularities in the firm’s loan transactions.
What is the Allegation?
According to CBI sources, the firm is accused of diverting loan funds through fraudulent means, such as submitting fake invoices and receipts. The loan was issued via a Letter of Credit (LC)—a financial tool that guarantees payment from a buyer to a seller. However, the firm allegedly misused the LC and transferred the funds to other bank accounts, rather than using them for their intended purpose.
These irregularities took place between 2012 and 2018. In 2018, the loan account became a Non-Performing Asset (NPA), meaning the company was unable to repay the loan, causing significant financial losses to the public-sector bank.
Misuse of Loan Funds
The CBI’s initial investigation shows that the firm’s directors and other individuals involved may have deliberately used the loan for purposes other than what was agreed upon. This misuse of funds violated the terms of the loan, and the company is suspected of submitting false invoices and receipts to make it appear that the funds were being used properly.
In reality, the funds were allegedly transferred to other accounts, allowing the company to cheat the bank and cause a loss of ₹255.74 crore. The investigation will explore the role of all involved parties to determine the extent of the fraud.
How Did the Fraud Happen?
The complaint filed by the Bank of Baroda states that the company initially received a loan of ₹103 crore in 2012. Over time, this amount was increased to ₹360.5 crore by 2015, as the bank reviewed and expanded the company’s credit limit. However, by March 2018, when the bank last reviewed the loan, the company had failed to meet its repayment obligations, and the loan account was officially declared an NPA in June 2018. At this point, ₹255.74 crore was still outstanding.
Legal Action
The CBI has registered a case against the firm, accusing it of criminal conspiracy, cheating, and criminal misconduct. The investigation will be conducted under the Indian Penal Code and the Prevention of Corruption Act to determine how the fraud was carried out and who was involved.
Conclusion
This case highlights the serious consequences of financial fraud and the importance of strict monitoring and accountability in bank loans. The CBI’s investigation aims to uncover how the funds were misused, and what steps can be taken to ensure such large-scale frauds are prevented in the future. As the investigation continues, more details are expected to emerge about how the company’s actions affected not only the bank but also the broader financial system.
Loans were sanctioned in 2012 and conduct of the loan was satisfactory by bank for over 6 years . Then how it will be a fraud ? CBI cases normally haunt bank officers than the borrowers. Bankers need to analyse and use commonsense before classifying the account as fraud.
In 2012 Rs103 crores in 2015 Rs 360.5 cr so in 3 years more than 3 fold. If one will study the BS , Sunday creditors will definitely more than stocks and eligible debtors. Chartered accountant must have mentioned accounts of different banks, necessity not studied by sanctioning authorities. Loan accounts are not properly studied, Diversion of funds reasons not checked, I doubt renewals are done timely,to avoid slippage to NPA accounts are renewed. There must be lake of proper supervision from branch level to sanctioning authority level.
This is called failure of credit risk management