Dear Readers,

I am deeply saddened by the Air India plane crash in Ahmedabad which is the most tragic accident. Let us all hope and pray for strength and healing.

India’s foremost political genius, Chanakya, once said something profoundly insightful: “Just as one cannot know how much water a fish drinks, you can never know how much a government official confiscates.”

While he was highlighting the endemic corruption prevailing in those days, Chanakya's words ring equally true for our banking system. From relationship managers to CEOs—and many layers in between—those entrusted with safeguarding public funds often find themselves tempted by the sheer volume of money around them.


A recent film, Lucky Bhaskar, portrayed a street-smart bank manager physically siphoning off funds, rotating them for a few weeks, and then adjusting the books before returning the money. It’s no secret that many bankers do more than just safeguard deposits—they actively move money around, sometimes in questionable ways.

No longer are banks perceived merely as safe havens for public savings; they are increasingly exposed as sites where fiduciary responsibility collides with human frailty and systemic fragility.

The recent cases

Earlier this year, IndusInd Bank confessed to a colossal accounting scandal. About Rs 172 crore of microfinance income had been faked over three quarters; errors in internal derivative trades added up to a Rs 2,329 crore loss. Top executives resigned, internal audits implicated staff in deliberate misreporting, and SEBI banned former leaders for insider trading. This wasn’t a single lapse—it was prolonged, orchestrated malfeasance. The bank claimed it was “mistakes,” but audit findings painted a damning picture of deliberate fraud and concealment.


At ICICI’s Kota branch, a relationship manager siphoned off Rs 4.58 crore from 110 customers across 41 accounts. She prematurely withdrew FDs, activated overdrafts, and rerouted funds into stock‑market gambles—managed digitally, hidden from both clients and colleagues. This fraud underscores how digital platforms, meant to democratise banking, also empower internal predators. Experts now demand RBI-mandated safeguards—FD-tokenisation, tighter OTP and account-change protocols—to block unauthorised access. Not just IndusInd and ICICI but even the country’s top private lender, HDFC Bank, saw a row with Lilavati Trust.

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The digital paradox

These scandals reveal a paradox: digital banking, applauded for transparency and efficiency, also accelerates internal subversion. Online platforms allow staff to manipulate accounts, spoof communication, override system alerts—all in milliseconds. In ICICI’s case, mobile number changes disabled OTPs and delayed detection. Digital convenience without airtight oversight merely shifts the battleground—fraud moves not through vault doors, but through keystrokes.


Banks have tried traditional fixes: routine transfers of branch staff to prevent power accumulation and periodic audits. But in the digital era, such measures are no longer sufficient. The ICICI case spotlights a glaring loophole—employees who misuse internal privileges can exploit automation to conceal fraud.

Code, culture and compliance

A three-pronged reform is imperative. Technical controls like tokenisation and read-only digital interfaces for staff, segregated roles, and real-time fraud alerts must be prioritised. Cultural overhaul is equally necessary, reinforced through whistleblower protection, staff rotation, and a zero-tolerance stance from top management. Regulatory vigilance is crucial, with the Reserve Bank of India and the Securities and Exchange Board of India quickening timelines for inspections and enacting pen alties tied to governance failures.


Channeling Chanakya’s wisdom, we must recognise that even the most seemingly loyal guardians of public funds—bankers—are vulnerable to temptation. The recent frauds at IndusInd and ICICI bare systemic gaps, not just individual greed. Digital banking magnifies both opportunity and risk.

India’s banking reputation is built on trust. It must now be strengthened on accountability. Without decisive action in governance, digital controls, and regulatory oversight, the vault remains ajar—and the cost of negligence may prove immeasurable. With all this, customers might question... Is there money safe – from the bankers?

Please share your feedback, suggestions if any. You can reach me on amol.dethe@timesinternet.in and follow me on LinkedIn at ETBFSI Digest.

As usual, I am adding here the top 5 stories of the week, trust you will find them meaningful.

1. PNB housing to shift focus from prime to affordable for better yields, says MD & CEO
2. Credit bureaus need individual level data for flagging microfinance stress, says CIBIL
3. RBI rate cut: Mid-sized banks may outperform larger private, PSU rivals
4. Zaggle to generate Rs 55-60 crore in revenue from recent acquisitions; Founder hints at another ‘large deal’
5. Ten ways RBI’s June Monetary Policy will impact the broader economy
   

Happy Reading
Amol Dethe,
Editor,
ETBFSI

(Editor's note is a column written by Amol Dethe, Editor, ETBFSI. Click here to read more of his articles exploring several buzzing topics)

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