What Is The Bank Of Baroda Fraud? Exposing The Misconduct

Bank of Baroda fraud is a critically infamous headline that has tarnished the image of the Indian banking sector. The agents not only linked their own mobile numbers to the customers’ accounts to register into the “Bob World” app. But also stole a whopping Rs.22 lakh from the poor 362 customers.

How in the heck did this happen?

Well, the roots of this fraudulent saga began two years ago. What happened in all the two years? How did it lead to the Bank of Baroda fraud? You may wonder. Stick to this article because we will thoroughly uncover the Bank of Baroda fraud- a tale of deception and consequences.

Keep reading!

(A) Story So Far

In a startling revelation, the Bank of Baroda, a prominent public sector bank, has unveiled a financial puzzle. This revelation has left 362 customers in dismay, with six individuals bearing the brunt of losses exceeding a staggering Rs.1.10 lakh each—amounting to a total of Rs.22 lakh!

What’s more?

This intricate story unfolds with the involvement of intriguing characters known as business correspondents (agents).

What they did will blow your mind!

Those agents linked their mobile numbers to the customers’ banking accounts and registered them in the “Bob World” app. It is just as if someone linked his/her phone number to your bank account and used it for Internet banking (UPI) from his/her phone. They can easily swipe off the money in your bank account too! And those agents of Bank of Baroda fraud did the same!

Imagine the victims’ pain… It is agonizing!

But how did those agents execute this cunning plan? Can someone register another phone number to your bank account that easily? Yes, if you haven’t linked your phone number to your bank account, then it is cent percent possible. This thing can happen to you as well without being informed.

Some of those agents also forced the customers to give their consent to register another mobile number. Really? Were those customers insane? Well, not truly. Most of them belong to rural areas with little education, surviving only through the government’s incentives. That’s why they weren’t aware of such cunningness of Bank of Baroda fraud agents.

Well, this fraudulent strategy was just the tip of the iceberg. There’s a lot more to this. We will cover it in detail in the upcoming sections. 

Stay tuned for the twists and turns in this captivating financial saga!

(B) Bob World App: Root Cause of Bank of Baroda Fraud

In November 2021, the Bank of Baroda made waves by introducing ‘Bob World,’ a comprehensive banking app. They marketed it as a revolutionary platform where customers could “Save, Invest, Borrow, and Shop.” The app was intended to provide at least 95% of the services a retail user might need.

Like any other company/application, the expansion of the user base of the “Bob World” app also became a prime objective of the bank. So it opted for two types of strategies- “Pull Strategy” and “Push Strategy” to expand the user base of the bank-

(B.1) Pull Strategy

To ensure the app’s success, the Bank of Baroda devised a strategy to attract customers by offering them special benefits. Each transaction carried a reward – from signing up on ‘Bob World’ to making UPI payments, bill payments, flight bookings, and requesting credit reports, customers earned valuable points. These points had monetary value, enticing customers to engage with the app.

(B.2) Push Strategy

The Bank’s top management had set unrealistic targets for their agents. They forced the agents to onboard a large number of customers on the “Bob World” app. However, the pressure to meet unattainable targets resulted in a troublesome twist. Bank staff struggled to meet these demands and faced criticism from top management. In search of a workaround, some employees resorted to fraudulent practices.

(C) Fraudulent Tactics to Register on Bob World App

The Bob World App’s expansion led to this scandal. It turned out that these agents, under relentless pressure from the bank to boost app registrations, took an unexpected turn. Hence, they misappropriated funds from unsuspecting customers through unauthorized mobile linking.

They started by grabbing a list of bank accounts without phone numbers. They randomly put in numbers, whether they were staff, family, or even janitors. After connecting an account, they’d get the app, use the code sent to them, and sign the customer up for “Bob World.”

This worked well and got them praised in meetings. News of their trick spread and Bank of Baroda employees in several states started doing the same. Some of the Indian states where the Bank of Baroda fraud occurred were-

• Uttar Pradesh
• Rajasthan
• Gujarat
• Jharkhand

Sometimes, customers didn’t have smartphones. Those poor customers used keypad phones and were surviving on the government’s incentives. This was a golden opportunity of cunning agents of the Bank of Baroda. They called the customers (victims-to-be) to the branch, used their SIM cards on their own phones, and signed them up.

The app downloads went up a lot, and the management said it was a success. Shockingly, whistleblowers say that the higher-ups were aware and okay with these tactics. They just wanted success, no matter how.

And here is where Bob’s downfall began!

(D) Exposing the Misconduct

The plot thickens as the curtain rises on this financial scandal, brought to light by none other than the intrepid investigative team of The Reporters’ Collective (TRC) and the renowned news outlet, Al Jazeera.

What they found in Bank of Baroda fraud case was truly shocking! 

Multiple accounts were linked to the same mobile number, averaging 47 accounts per number. This created significant security risks, as individuals could access bank accounts and funds. Here the Bank of Baroda fraud was exposed to the public.

(E) Internal Audit: Trying to Cover Bank of Baroda Fraud

Once the scam was exposed, the Bank of Baroda decided to do a big country-wide checkup. They wanted to be sure about around 422,000 accounts that seemed to be wrongly connected. But here’s the twist: some bank workers said this checkup was just a way to hide the mess. They even told Al Jazeera that regional offices were telling them to create fake papers and documents to cover things up.

(E.1) Thousand lies to hide a single lie

The bank’s internal auditors had a mission: they were on the hunt for “Bob World” request letters and forms where customers asked for the app service on their phones. But, here’s the twist – they couldn’t find these documents most of the time. What they did find was quite puzzling. Reports showed that some accounts were linked to the phone numbers of complete strangers or “business correspondents,” who are basically the bank’s freelancing agents in rural areas.

The auditors also uncovered a tricky situation. Unauthorized mobile numbers were initially linked to these accounts and then quietly removed later. In some cases, customers gave one number when opening their account, but a completely different number was connected to their account on “Bob World.”

Note: When it comes to corporate scams, nobody has forgotten Satyam Scam yet. If you want to deep dive into it then visit our article “Satyam Scam Case Study.”

(E.2) Shocking Revelation

By the way, the bank usually allows a single mobile number to be linked with a maximum of eight bank accounts, but the audit discovered that many business correspondents had their numbers linked with a staggering 10 to 60 accounts. That’s a lot!

(E.3) Exploiting the Poor and Vulnerable Customers

Now, here’s where it gets more complicated. The audit revealed that some illiterate and underage customers were wrongly signed up on the app. These accounts were initially opened under the Pradhan Mantri Jan Dhan Yojana, and they were used for getting subsidies directly from the government. This raises some serious questions about whether some sneaky bank agents might have swiped those subsidies.

In response to these eye-opening findings, Bank of Baroda’s Chief General Manager, B Elango, sent a letter to all zonal and regional heads on August 10, 2023. He told them that they needed to fix these issues with essential documents. Al Jazeera reported this in its story.

(E.4) Resemblance to the Wells Fargo Scandal

This scandal bears a resemblance to the massive Wells Fargo bank scam in the United States, where staff opened unauthorized accounts, forged documents, and even stole money from customer accounts.

(F) The Aftermath: RBI’s Role in Executing Justice

On 10^th Oct,2023, the Reserve Bank of India (RBI) took action against the state-owned Bank of Baroda. It invoked its authority under Section 35A of the Banking Regulation Act, 1949, directing the Bank of Baroda to immediately suspend the onboarding of customers onto the ‘Bob World’ mobile application. This decision was based on specific supervisory concerns observed during the customer onboarding process.

Basically, it prevented them from adding new customers to their mobile app, ‘Bob World,’ due to significant supervisory concerns.

In response to the RBI’s directive, the Bank of Baroda stated that they have already implemented corrective measures to address the concerns raised by the central bank. They have also initiated further actions to close any remaining gaps. Bank of Baroda expressed its commitment to working closely with the RBI to address their concerns promptly and to the satisfaction of the regulatory authority.

(G) Final Thoughts on Bank of Baroda Fraud

The Bank of Baroda fraud case, which involved the introduction of the ‘Bob World’ banking app, revealed a troubling mix of aggressive expansion strategies and fraudulent practices. The bank’s push for user growth through unrealistic targets led to some employees resorting to misappropriating funds via unauthorized mobile linking. 

The scandal extended across several Indian states, jeopardizing the security of customer accounts. It also exposed the exploitation of vulnerable customers and raised concerns about subsidy misuse. The Reserve Bank of India (RBI) took action by suspending customer onboarding onto the app due to supervisory concerns, emphasizing the need for corrective measures and strong processes.

Let’s hope we won’t see any such frauds again!