In today’s Finshots, we tell you how The Reporter’s Collective and Al Jazeera’s investigation brought out a scam that unfolded at one of India’s largest public sector banks.

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The Story

On 10th October, the RBI banned the Bank of Baroda from onboarding new clients on their mobile app ‘bob World’. The reason?

Fraud!

Yup, a few months ago, the state-owned bank conducted an internal audit across 7,000 branches in the country. And they found something shocking — the bank’s agents had secretively withdrawn ₹22 lakhs from customer accounts.

Oops. So how on earth did this happen?

Well, let’s rewind a bit. To November 2021. BoB made a big splash by announcing that it was finally launching its banking app. It told customers that it would be a gamechanger and they could “Save, Invest, Borrow, and Shop” on the platform. In total, it would have at least 95% of the services that a retail user would need.

And to make it a success, BoB went on overdrive.

They formulated a pull strategy. They promised customers special benefits. For each transaction a customer initiated — signing up on bob World, making UPI payments, recharging bills, booking flights, and even requesting a credit report — they’d earn points. And these points had a monetary value associated with them. This meant that at some point, customers could encash the points or redeem it for some online shopping.

But of course, that alone wasn’t enough. They need to ‘push’ the app too. And that’s when the top brass turned to the staff and said, “We want to see you getting xx customers on board the app each day. Go get ‘em!”

That’s where everything started to go wrong for Bank of Baroda. Because it seemed like the targets were too unrealistic. Staff couldn’t meet them. They began to get an earful from the top management. And no one likes to be pulled up by the bosses, right?

So some ingenious folks found a workaround. They simply downloaded a list of bank accounts that weren’t linked to any mobile number. And they simply began to input random numbers — it could be the staff’s own number, or that of their relatives, or even the cleaning and security staff who worked at the branch. Once the account was linked, they could simply download the app on a phone, get the OTP sent to themselves and sign the customer up on bob World.

Ta-da! They were able to meet their targets. They were applauded in meetings.

The word spread. Employees told their friends about the neat trick. And Bank of Baroda staff in Uttar Pradesh, Rajasthan, Gujarat, and Jharkhand all began to resort to the same tactic. But there was more — in some cases, customers didn’t have smartphones. They still operated physical keypad-based feature phones which didn’t support the app. So, the BoB staff called them to the branch, took out the sim cards, inserted it into their own smartphone and signed them up.

The number of downloads soared. The sign up metrics ballooned. The management claimed that the app was a success! And Bank of Baroda even began to win awards for its app. And here’s the shocker — Apparently, BoB whistleblowers claim that these tactics had the full blessing of the zonal and head offices too. Everyone wanted success by hook or crook.

It was insane!

But wait…don’t the banks have systems in place to prevent the same number being linked to multiple accounts?

Well, when Al Jazeera reached out to the bank with that question a few months ago, the bank vehemently denied the problem. They said, “No way. Every bobWorld account has a unique mobile number associated with it.” But when The Reporter’s Collective and Al Jazeera began to investigate, they found that on average, 47 accounts were linked to the same mobile number.

Now you can imagine what unscrupulous people could do, right? They’d have easy access to the bank account. They could transfer money easily or initiate transaction since they’d be the ones to receive the OTP. They could basically empty the bank account if they so desired. And that’s what some bank agents did in rural areas. They quietly siphoned off ₹22 lakhs from customer accounts. Or at least, that’s the number that has been revealed so far.

It's a sorry state of affairs at this state-owned institution

But wait…the matter doesn’t end there.

You see, even the audit that the bank ordered seems to be quite problematic. Apparently, Bank of Baroda got their own employees to run the show!

Typically, when there’s an inkling of fraud, you would hire an independent party to go through documents with a fine-toothed comb. It shows that you’re serious about getting to the bottom of the problem and finding the truth. But taking one’s employees with something so important doesn’t cut ice with anyone. Because here’s the thing. You can manipulate an internal audit if you so wish.

For instance, TRC says that to cover their backsides, the top brass in regional offices asked the ‘auditors’ to forge documents — get a signature or thumbprint of the customer on a blank form, fill it up with necessary details, and backdate it. Or when that was not possible, the bank staff simply forged the signatures themselves. So when people asked questions they’d have evidence that protocol was actually followed.

Basically, the allegation is that the audit was just a charade and rather than bring the truth to light, the objective was to sweep the problematic crumbs under the carpet.

And if all this sounds familiar, it’s because we’ve seen it before. Remember the massive Wells Fargo bank scam in the US a few years ago? It was a similar modus operandi. The staff opened accounts without permission, forged signature and identification numbers, and then some folks took it a step further and stole money from customer accounts too. And then the top brass tried to hide all these dubious activities.

But why do these scandals continue to happen?

Well, the simple answer is that unrealistic goals or sales targets create an incentive to cheat. Or as one Bank of Baroda employee put it, “At the end of the day, to meet the number [target] and save your bread and butter, you have to do such things.” And the thing is sometimes, such ‘group’ targets can be an even slippery slope — by group target, we mean a diktat saying, “Each branch is expected to onboard 100 digital app accounts daily.” When Tae-Youn Park, an Associate Professor at Cornell University, dug into the matter he found that team-based incentives (or targets) can lead to members ignoring ethical problems. They don’t want to be the odd one out who disrupts the group dynamic. He says that research indicates that teams are more likely to falsify data than individuals alone.

Maybe it's something that management teams across all companies should ponder when setting goals

Anyway, the bottom line for Bank of Baroda is that the RBI has taken notice. The bank will go through a cleanup. Maybe some heads will roll. But at the end of the day, the scandal may not rock the boat much. Things will continue in much the same way till some enterprising whistleblower reveals the next scam. That’s just the unfortunate reality.

Until then…

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