Indian bank faces $1.78 billion fraud, Experts suggest- high time to adopt Blockchain technology
Feb 16, 2018 Posted / 2092 Views
Frauds and scams are not new to India and many times country's top banks experienced huge losses and customers were compromised with their savings because of thefts. Delhi-based Punjab National Bank one of the oldest and most trusted banks of the country on 14 February detected a $1.78 billion (approx. Rs. 11,400 crores) fraudulent and unauthorised transactions scam "for the benefit of a few select account holders. The Bank reported that it had stated the matter to the investigating agencies, and possibly the case will be look after by CBI (Central Bureau of Investigation).
“In the bank, these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of the underlying transactions,” the bank said.
Punjab National Bank stated that it had been deceived of INR 11,400 crore by diamond jeweller Nirav Modi and his relative Mehul Chinubhai Choksi (said to be his maternal uncle). The statement read that Nirav Modi and his relatives had a connection with several companies, which they owned and two bank employees had known of that, who issued letters of undertakings to them. The bank claimed that LOU which is just like a guarantee from the bank were relied upon by other branches such as Axis Bank, Allahabad Bank and Union Bank of India to make payments for diamond imports from foreign suppliers. The other banks are demanding their money from PNB. On the other hand, PNB is just trying to escape from its commitment on the plea that while it is responsible for the dishonourable acts of its employees, the other banks must also own up some responsibility because their employees also have, according to PNB, been involved in the enormous fraud.
Blockchain technology has been called as a possible solution which is getting a lot of media attention these days. The technology can possibly alleviate from the frauds such as the one in case of PNB and many blockchain enthusiasts are also suggesting the same.
The frauds like these are done in a systematic manner. Nonetheless, it is mostly linked to the cryptocurrency Bitcoin, blockchain technology is now winning recognition right across the financial world as well as in the world of record keeping. For instance, the state government of Andhra Pradesh announced for its adoption last year when it said that it will use the technology to store land records.
We already know that the blockchain cannot be manipulated and it is a digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. All the data which is stored on a blockchain is distributed and continuously updated. This obviously has many benefits as the data is not stored at a single location and not retained by a single authority. The records are actually public and can be validated quite easily. The data is validated by millions of nodes simultaneously across the globe.
The banking system throughout or Indian banking system can specifically benefit from the Blockchain technology. The frauds as we have seen in the PNB case can be easily avoided through Blockchain technology. The corrupt PNB officials couldn’t have prefaced a dishonest and unapproved LOU into the system as it would have been easily intercepted the attention of the higher administration in the hierarchy.
With the help of Blockchain, any manipulation shows up the very day it had been attempted and PNB could have instantly informed the complete banking community. A standalone LOU record at PNB Mumbai branch is what encouraged the fraudsters to do the scam. Nobody could even detect it until somebody secured the data and until then scamsters had already gotten the money.
Blockchain technology offers for the internal check of the network rather depending on age-old auditing. The rationale comes up that no single individual can clear all the transactions. The corrupt officials at PNB would have easily gotten into knowledge if the contract as such would have been generated to the knowledge of everybody in the network.
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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