The
Assignment
On
CANARA BANK FRAUD CASES
Completed in subject of
Banking and Financial Services Institutions
Submitted to
MARATHA MANDIR’S
BABASAHEB GAWADE INSTITUTE OF MANAGEMENT
STUDIES
MUMBAI CENTRAL
Submitted by
SONALI SUNIL RAUT
ROLL NO. 37
Under the Guidance Of
Mr. Pranav Indulkar
Submission Date
10-01-2023
Master Of Management Studis (MMS)
University Of Mumbai
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1. TITLE OF THE BANK FRAUD
THE RS 8,000 CRORE SCAM AT SBI, CANARA BANK
2. INTRODUCTION
BANK OVERVIEW
It is Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Shri Ammembal Subba
Rao Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank
Ltd.' in 1910 and became Canara Bank in 1969 after nationalisation.
It provides various services to its corporate clients such as Cash Management Services, loans,
IPO monitoring services, etc. NRI Banking– Besides various personal banking products it also
offers remittance services, consultancy services to its NRI [Link] also offers various
products and services to priority and SME sector.
The Bank has gone through the various phases of its growth trajectory over hundred years of
its existence. Growth of Canara Bank was phenomenal, especially after nationalization in the
year 1969, attaining the status of a national level player in terms of geographical reach and
clientele segments. Eighties was characterized by business diversification for the Bank. In June
2006, the Bank completed a century of operation in the Indian banking industry. The eventful
journey of the Bank has been characterized by several memorable milestones. Today, Canara
Bank occupies a premier position in the comity of Indian banks.
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3. BACKGROUND STORY OF THE CANARA BANK FRAUD CASE
The public sector banks of our country have fallen prey to another major scam. The State
Bank of India and Canara Bank had filed separate cases against two private firms for alleged
bank fraud of over Rs 8,000 crore!
We know that banks are the backbone of any economy. When such fraudulent activities occur
frequently in our banks and financial institutions, it causes major harm to India's economic
growth. Moreover, it affects the lives of common citizens.
A consortium of 14 banks, led by Canara Bank, had lent over Rs 7,926 crore to a Hyderabad-
based company known as Trannstroy (India) Ltd. The company deals in the construction of
highways, bridges, irrigation projects, and metro-related work. They are also in the oil and gas
business.
4. BRIEF OF CANARA BANK FRAUD
In a detailed filing to the concerned legal authorities, Canara Bank alleged that Trannstroy
Ltd had availed credit facilities using multiple banking arrangements. This refers to when a
borrower avails loans independently from more than one bank. There is no contractual
relationship between the various bankers of such borrowers.
The lender alleged that Trannstroy was involved in falsification/fabrication of books of
accounts, hiding of stock statements, and tampering with its balance sheet. Canara Bank also
alleged that the private firm misappropriated its funds and diverted the loan amount sanctioned
by the consortium. Transstroy (India) Ltd had caused a loss of around Rs 7,926.01 crore to
Canara Bank and other member banks. The account had to be declared as a non-performing
asset (NPA).
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On December 19, 2020, the Central Bureau of Investigation (CBI) registered an FIR against
Transstroy (India) Ltd and its Chairman & Managing Director (CMD), Cherukuri Shridhar
Sridhar. The CBI has also booked the firm's Additional Directors Rayapati Sambasiva Rao
and Akkineni Satish, and some unknown public servants. One of the accused, RS Rao, is a
former Telugu Desam Party MP. The investigation agency conducted raids at the premises of
the private company and the offices/homes of the accused members at Hyderabad and Guntur
and found necessary documents.
On the same day, Canara Bank issued a clarification on the details regarding the alleged fraud
by Transstroy (India) Ltd. The lender stated that its share in the amount lent by the consortium
of 14 banks stood only at Rs 678 crore. The bank had also made 100% provisions for the
same, as per the RBI guidelines.
Among those named as accused in the case are the company’s chairman-cum-managing
director Cherukuri Sridhar; Mr. Rao, its additional director; and another additional director,
Akkineni Satish. The FIR has been registered on a complaint from the Canara Bank, leader of
a consortium of lenders.
The company had taken credit facilities on multiple banking arrangements. According to the
bank, the accused persons fabricated the books of accounts, fudged stock statements, tampered
with balance sheets and indulged in round tripping and diversion of funds.
The country's premier investigation agency conducted searches in the offices and residences of
the accused in Hyderabad and Guntur on Friday, acting on a complaint from Canara Bank. The
CBI recovered incriminating documents during the searches. The company and its directors are
charged with availing of credit facilities on multiple banking arrangements with a consortium
led by Canara Bank.
It was alleged that the accused was involved in falsification and fabrication of books of
accounts, fudging of stock statements, tampering of balance sheets, round tripping of funds,
etc. The loan amounts are alleged to have been diverted, causing a loss of Rs. 7926.01 crore to
Canara Bank and other member banks. The account had become a non-performing asset and
the fraud was reported.
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THE SBI FRAUD CASE
The details of the scam which occurred at the State Bank of India are very similar to that of
Canara Banks'. SBI had filed a complaint of fraud of Rs 313.79 crore against Agnite
Education Ltd. It is a Chennai-based edtech firm that primarily offers e-learning courses.
The bank has alleged that Agnite Education, represented by its Chairman & Directors, availed
loans of about Rs 310 crore from SBI. The loan amounts were diverted to accounts of related
parties, and has been marked as a non-performing asset(NPA). This led to SBI incurring a
loss of Rs 313.79 crore.
On Saturday (December 19), the CBI registered cases against Agnite Education Ltd, its
Chairman K Balasubramaniam, Director K Padmanabhan, some unknown public servants,
and others. The agency had also conducted raids at the firm’s office in Chennai and found
substantial evidence.
5. TIMELINE OF EVENTS THAT CONTRIBUTED TO FRAUD
The National Company Law Tribunal (NCLT) and was admitted by NCLT
Hyderabad on October 10, 2018! The company was declared as a wilful
defaulter by Canara Bank on December 26, 2018, more than two years ago!
On December 19, 2020, the Central Bureau of Investigation (CBI) registered
an FIR against Transstroy (India) Ltd and its Chairman & Managing Director
(CMD), Cherukuri Shridhar Sridhar. The CBI has also booked the firm's
Additional Directors Rayapati Sambasiva Rao and Akkineni Satish, and some
unknown public servants. One of the accused, RS Rao, is a former Telugu
Desam Party MP.
6. PARTIES WHO WERE RESPONSIBLE IN FRAUD
Transstroy (India) Ltd and its Chairman & Managing Director (CMD), Cherukuri
Shridhar Sridhar
And other private sectors banks.
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7. CONCLUSION
The scams related to our banks and financial institutions continue to occur in India. Over the
past few years, we have noticed that SBI and other PSU Banks have reported the most number
of fraudulent accounts or loan defaulters. The public sector banks, which continue to give loans
to big corporates and wealthy entities, end up incurring huge losses. The people who
manipulate and deceive these lenders manage to safely escape from India as well. Nirav Modi
and Vijay Mallya are just two out of the many prominent business figures who have been
convicted of thousands of crores of bank fraud. These entities always find a way to evade the
law.
At the same time, people from low-income groups do not get essential loans for their life-
sustaining activities. Farmers are having a tough time securing funds for their agricultural
activities. If a common man is not able to pay off their loans, banks end up acquiring their
properties which had been kept as collateral. In many cases, they are further penalised and even
beaten up by goons. People also tend to forget that it is the common taxpayers’ money that has
been deposited or infused into these public sector banks. We find that there is no sense of
accountability or transparency in their activites.
Fortunately, both SBI and Canara Bank had made 100% provisions against their respective
fraud accounts. The investigation related to both scams is underway. We would be able to
receive more clarifications from the CBI in the days to come. Will the accused be lawfully
punished for their fraudulent activities, or, will they be able to escape from all charges.
