How a $1.8 Billion Indian Bank Fraud Lasted Seven Years

The story of how India’s biggest bank fraud went undetected for seven years includes an $81 million cyber-heist in neighboring Bangladesh, penny-pinching lenders and a series of missed opportunities.

In 2016, after revelations that hackers had infiltrated the Bangladeshi central bank’s computer systems to siphon off money, its counterpart in India sensed a danger to its own banking system. The Reserve Bank of India reminded all the country’s lenders to ensure their computer networks were properly integrated with Swift, the global system used to transmit payment instructions in the Bangladesh theft.

Unknown to the RBI at the time, a rogue employee at state-owned Punjab National Bank had allegedly been taking advantage of precisely that flaw in the Indian lender’s computer systems for five years, perpetuating a fraud that would eventually balloon to $1.8 billion, according to PNB’s account.

“The biggest thing that didn’t happen was the linkage between Swift and the bank’s back-end software — they didn’t talk,” said Abizer Diwanji, a financial services partner in India at the accountancy firm EY. “The ball was first dropped” when PNB missed a chance to reconcile the two systems, he said.

As the fallout from the incident spreads and various government agencies move to investigate, one thing stands clear: the financial damage was exacerbated by a combination of inferior technology, weak risk management and insufficient regulatory oversight. Had the fraud been discovered a year earlier, the total amount would have been about $800 million lower.


PNB alleges its former employee Gokulnath Shetty provided billionaire jeweler Nirav Modi and his associates with guarantees to obtain loans from abroad. Between 2011 and early 2017, guarantees worth 65 billion rupees ($1 billion) were issued without any collateral, followed by another 49 billion rupees over March to May last year, when Shetty retired, according PNB’s complaint that has been made public.

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To read about the modus operandi behind the fraud, click here