Dewan Housing Finance Corporation Limited (DHFL) SCAM

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Dewan Housing Finance Corporation Limited (DHFL) SCAM

  • Steps to prevent frauds are needed which include tightening the internal and external audit systems of banks
  • Dewan Housing Finance Corporation Limited (DHFL) has hoodwinked a consortium of banks driven by the Union Bank of India to the tune of ₹35,000 crore through financial misrepresentation.

Banking system

  • The backbone of its economy.
  • Excessive losses to banks affect each citizen since the amounts deposited in banks belong to the citizens of the country.
  • NPAs mainly due to bad loans and scams.
  • 34% of scams in banking industry are due to
  • Inside work
  • Poor lending practices
  • Involvement of the junior and mid-level management.

An NPA projection, a list

  • Financial Stability Report (2021): Gross NPAs of banks rising from 6.9% in September 2021 to 9.5%.
  • High NPA reduces net interest margin of banks and increases their operating cost.
  • IIM Bangalore: Poor bank corporate governance is behind rising bank scams and NPAs.

Steps that need consideration

  • Exercise due diligence and caution while offering funds.
  • Regulation and control of chartered accountants to reduce NPA of banks.
  • Caution while lending to Indian companies that have taken huge loans abroad.
  • Tighten internal and external audit systems of banks.
  • Fast rotation of employees of the bank's loan department.
  • Set up an internal rating agency for evaluation of large projects before sanctioning loans.
  • Implement an effective Management Information System (MIS) to monitor early warning signals about business projects.
  • Use artificial intelligence (AI) to monitor financial transactions.


  • India has to improve its loan recovery processes and establish an early warning system in the post-disbursement phase.
  • Banks need to carry out fraud risk assessments every quarter.