Bank frauds detection and reporting increased due to Govt’s proactive measures – Finmin

As per Finance Ministry due to Government’s proactive measures, there has been increased detection and reporting of bank frauds

The above statement was given in response to Rajy Sabha Starred Question replied on 1.1.2019 by the erstwhile Finance Minsiter Shri Arun Jaitely.

One of the question asked by Shri MP Veerendra Kumar was as to whether the figures released by RBI have stated that frauds involving Rs. 8670 crores have been committed in banks in recent three years ?

Apart from seeking details and reasons of the fraud, the Finance Minister was requested state the steps adopted to avoid such frauds in future.

Replying to the above question, the then Finance Minister had stated that fraud data reported to RBI is by the year of reporting and not the occurrence of the fraud or sanction of loan. Quoting  the case of PNB, he stated that it is not possible from the data reported to arrive at year-wise amounts involved in fraud. 

The Finance Ministry has now issued a Press Release clarifying news reported in media to paint a picture of rising frauds in banks in recent years.

As per the press release, the ministry states that the occurrence of frauds was enabled by laxity in the financial system which has been systematically dealt with through comprehensive banking reforms instituted by the Government to address underlying causes and provide for proactive checking for and detection of frauds.

The release states the following key steps taken in this regard :

The Government has issued instruction that all accounts exceeding Rs. 50 crore, if classified as NPAs, be examined by banks from the angle of possible fraud. In addition, Public Sector Banks (PSBs) have also been advised to seek a report on the borrower from the Central Economic Intelligence Bureau, in case an account turns NPA.

Proactive action has been taken against wilful defaulters, with FIRs being registered by PSBs against 2,881 wilful defaulters.

For enforcement of auditing standards and ensuring the quality of audits, Government has established National Financial Reporting Authority as an independent regulator.

Fugitive Economic Offenders Act, 2018 has been enacted in order to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.

Pursuant to Government’s advice to PSBs, they have been obtaining certified copy of passport of the promoters/directors and other authorised signatories of companies availing loan facilities of more than Rs. 50 crore, and are ensuring rotational transfer of officials/employees on sensitive posts.