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SBI.. Solid Foundation is Melting



State Bank of India is the largest Bank in India and in certain respects is a global size Bank. There are millions of customers in India and abroad and next to RBI, it is the Bank for most Indian Government transactions.

Can such a Bank fail?.. If so what could be the consequences on the public?..On the Economy?.. The thought itself sends a chill down the spine. Obviously no Indian would like to believe that SBI can fail. But imagine.. if SBI can be brought down, it would be the biggest financial invasion that any global financial institution can ever dream of. Even if the trusted foundation of the Bank can be shaken, it would amount to a big victory for the anti India forces. It is therefore reasonable to think that there could be many forces interested in the fall of SBI.

Are they at work?..is a thought that passes my mind....Why such diabolic thought?...Why bring it up to public now?...Here are some reasons.

During an examination of a casual complaint from one of the customers of State Bank of India in a branch in Bangalore, it came to my notice that there were several unexplained anomalies in the accounting of fixed deposit accounts in the branch. The problem was inherent in the computerised system and I presume it would be manifest in several other Branches of the Bank.

I understand that the software responsible for the problem is sourced from an Australian Company and customized by TCS.

The anomalies described in greater detail in the following article indicate

a) Customers are getting less interest than they should get as per contract

b) The amount of interest debited to the Interest payable account does not tally with the amount credited to the customer's SB account

c) The amount of interest paid to the customer does not tally with the amount of interest credited internally to the interest payable account leading to the payment of interest from the capital account of the fixed deposit in violation of RBI guidelines.

d) There is an indication of existence of huge unreconciled amount within the branch which has not perhaps been adequately handled by the auditors.

e) The Branch staff is unable to fathom the essence of the problem since the account is managed from the central server in Mumbai.

f) The staff appear to be inadequately trained to handle exceptional situations and software bugs.

g) Neither the vigilance department nor the customer relation department of the bank has taken the problem seriously for rectification

h) The software vendor has not shown any interest in sorting out the mess though there is a clear indication of a software bug. (Probably the matter has not been brought to their notice)

i) The problem is not restricted to a single case and according to information available there are nearly 60 accounts in the branch in which the problem has repeated.

j) The anomaly in one respect is  in the range of 16 % of the interest amount involved which indicates an alarming position.

It would be necessary for State Bank of India to immediately put together a team of experts to investigate the matter and understand the depth of the problem or if it indicates a fraud or a massive software related mess. If there is a possibility of a fraud or a software bug the impact can be huge enough to even melt down the solid foundation that SBI has built both in terms of physical assets as well as in the form of the Trust which it has with the Indian public.

It is also necessary for RBI to immediately take action in expediting the investigation process. Even TCS needs to set up a team to investigate if the software has any bug.

We are all aware how Salami attacks are built into software and one cannot rule out the possibility of a fraud of similar nature.

More details will follow in the next piece of article.


January 12, 2006

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