Bank Reforms to Check Frauds
Ministry of Finance
Bank Reforms to Check Frauds
Posted On: 09 JUL 2019 8:21PM by PIB Delhi
Occurrence of frauds was
enabled by laxity in the financial system, and the underlying causes have been
systematically dealt with by the Government through comprehensive steps for reduction in occurrence of frauds, and
their proactive checking and timely detection. The steps taken in this regard
include, inter-alia,the following:
- Government
has issued “Framework for timely detection, reporting, investigation etc. relating
to large value bank frauds” to Public Sector Banks (PSBs), for systemic
and comprehensive checking of legacy stock of their non-performing assets
(NPAs), which provides, inter-alia, that—
- all
accounts exceeding Rs. 50 crore, if classified as NPAs, be examined by
banks from the angle of possible fraud, and a report placed before the
bank’s Committee for Review of NPAs on the findings of this investigation;
- examination
be initiated for wilful default immediately upon reporting fraud to RBI;
and
- report
on the borrower be sought from the Central Economic Intelligence Bureau in
case an account turns NPA.
- Fugitive
Economic Offenders Act, 2018 has been enacted to deter economic offenders
from evading the process of Indian law by remaining outside the
jurisdiction of Indian courts. The act provides for attachment of property
of a fugitive economic offender, confiscation of such offender’s property
and disentitlement of the offender from defending any civil claim.
- PSBs
have been advised to obtain certified copy of the passport of the
promoters/directors and other authorised signatories of companies availing
loan facilities of more than Rs. 50 crore and, decide on publishing
photographs of wilful defaulters, in terms of Reserve Bank of India
(RBI)’s instructions and as per their Board-approved policy and to
strictly ensure rotational transfer of officials/employees. The heads of
PSBs have also been empowered to issue requests for issue of Look Out
Circulars.
- For
enforcement of auditing standards and ensuring the quality of audits,
Government has established the National Financial Reporting Authority as
an independent regulator.
- Instructions/advisories
have been issued by Government to PSBs to decide on publishing photographs
of wilful defaulters, in terms of RBI’s instructions and as per their
Board-approved policy, and to obtain certified copy of the passport of the
promoters/directors and other authorised signatories of companies availing
loan facilities of more than Rs. 50 crore.
- In
order to bring transparency and accountability in the larger financial
system, bank accounts of 3.38 lakh inoperative companies were frozen over
the last two financial years.
The impact of the above
steps is reflected in RBI’s Financial Stability Report (FSR) of June 2019. As
per FSR, systemic
and comprehensive checking of legacy stock of NPAs of PSBs for frauds has
helped unearth frauds perpetrated over a number of years, which is getting
reflected in increased number of reported incidents of frauds in recent years
compared to previous years. The details of frauds of Rs. 1 lakh and above that
occurred during the last three financial years (FYs), reported by PSBs to RBI,
as per inputs received from RBI, are as under:
|
FY
of occurrence
|
Number
of cases
|
Amount
involved
(in
crore Rs.)
|
|
2016-17
|
1,745
|
24,291
|
|
2017-18
|
1,545
|
6,916
|
|
2018-19
|
739
|
5,149
|
Bank-wise details are at
Annex.
Note: Figures cited above
for PSBs include those for IDBI Bank Limited, which was recategorised as a
private sector bank by RBI with effect from 21.1.2019.
This was stated by Shri
Anurag Singh Thakur, Minister of State for Finance & Corporate Affairs in a
written reply to a question in Lok Sabha today.
Source:PIBNEWS
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