Comprehensive steps to reduce incidence of frauds in banks

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Press Information Bureau
Government of India
Ministry of Finance

23-July-2019 17:34 IST

Loans to Good Tax Payers

The Government has taken comprehensive steps to reduce the incidence of frauds in banks. The steps taken include, inter-alia, the following:

Government has issued “Framework for timely detection, reporting, investigation 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—

(i) 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;

(ii) examination be initiated for wilful default immediately upon reporting fraud to RBI; and

(iii) 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. Details of the number of cases and amount involved in frauds of Rs. 1 lakh and above that occurred during the last three financial years (FYs), reported by Scheduled Commercial Banks (SCBs), as per inputs received from RBI, are as under:

FY of occurrence	Number of cases	Amount involved (in crore Rs.)
2016-17	3,927	25,884
2017-18	4,228	9,866
2018-19	2,836	6,735

While repayment capacity and applicant’s liabilities, including tax liabilities, are relevant for such appraisal and assessment, processing of applications for appraisal, assessment, sanction and disbursement is also dependent upon availability of requisite details and documents to enable the bank to arrive at a decision in its commercial judgement with due regard to the technical feasibility and economic viability of the proposal and the creditworthiness of the applicant, in accordance with the bank’s Board-approved loan policy. Upon receipt of loan applications with requisite details and documents in support of technical feasibility and economic viability of the proposal and creditworthiness and repayment capacity of the applicant, banks appraise and assess the same for a decision regarding sanction and disbursement.

This was stated by Shri Anurag Singh Thakur, Minister of State for Finance & Corporate Affairs in a written reply to a question in Rajya Sabha today.

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Annex

Details of frauds as reported by Scheduled Commercial Banks and select Financial Institutions based on date of occurrence (amount involved Rs. 1 lakh and above), primarily in loan accounts sanctioned during previous years

Amounts in crore Rs.
Bank	Category	FY 2016-17		FY 2017-18		FY 2018-19
Bank	Category	Number of Frauds	Amount Involved	Number of Frauds	Amount Involved	Number of Frauds	Amount Involved
Aditya Birla Idea Payments Bank Limited	Payments Bank	–	–	–	–	24	1.45	Comprehensive measures have been taken to prevent frauds including directions to banks to examine all NPA accounts above Rs. 50 crore from the angle of possible fraud, initiation of criminal proceedings, enactment of Fugitive Economic Offenders Act 2018, creation of Central Fraud Registry, empowering heads of Public Sector Banks to request for issue of Look Out Circular, establishment of the National Financial Reporting Authority, straight-through processing between Core Banking System and SWIFT and instituting in PSBs the system of obtaining certified copies of passport of promoters/directors of companies availing of loans exceeding Rs. 50 crore. Comprehensive measures have been taken to prevent frauds including directions to banks to examine all NPA accounts above Rs. 50 crore from the angle of possible fraud, initiation of criminal proceedings, enactment of Fugitive Economic Offenders Act 2018, creation of Central Fraud Registry, empowering heads of Public Sector Banks to request for issue of Look Out Circular, establishment of the National Financial Reporting Authority, straight-through processing between Core Banking System and SWIFT and instituting in PSBs the system of obtaining certified copies of passport of promoters/directors of companies availing of loans exceeding Rs. 50 crore. Comprehensive measures have been taken to prevent frauds including directions to banks to examine all NPA accounts above Rs. 50 crore from the angle of possible fraud, initiation of criminal proceedings, enactment of Fugitive Economic Offenders Act 2018, creation of Central Fraud Registry, empowering heads of Public Sector Banks to request for issue of Look Out Circular, establishment of the National Financial Reporting Authority, straight-through processing between Core Banking System and SWIFT and instituting in PSBs the system of obtaining certified copies of passport of promoters/directors of companies availing of loans exceeding Rs. 50 crore.
Allahabad Bank	Public Sector Bank	63	1,398.19	11	40.77	12	509.67
American Express Banking Corporation	Foreign Bank	167	7.07	332	9.56	190	6.30
Andhra Bank	Public Sector Bank	36	75.82	37	880.11	11	193.51
AU Small Finance Bank Limited	Scheduled Small Finance Bank	1	1.45	4	0.25	5	0.35
Axis Bank Limited	Private Sector Bank	217	666.34	231	691.78	195	670.40
Bandhan Bank Limited	Private Sector Bank	24	1.51	21	1.22	6	0.91
Bank of America, National Association	Foreign Bank	1	0.01	16	0.36	9	0.23
Bank of Bahrain and Kuwait B.S.C.	Foreign Bank	2	0.23	–	–	–	–
Bank of Baroda	Public Sector Bank	140	1,723.83	84	695.29	32	797.12
Bank of India	Public Sector Bank	95	978.54	99	1,247.63	52	43.64
Bank of Maharashtra	Public Sector Bank	34	391.29	32	1,004.86	38	791.31
Bank of Nova Scotia	Foreign Bank	1	0.13	–	–	–	–
Canara Bank	Public Sector Bank	48	229.95	50	97.85	24	2.48
Catholic Syrian Bank Limited	Private Sector Bank	9	7.88	25	118.02	8	0.70
Central Bank of India	Public Sector Bank	59	153.85	56	11.08	45	2.53
Citibank N.A.	Foreign Bank	189	8.79	203	8.81	168	4.88
City Union Bank Limited	Private Sector Bank	3	4.38	10	48.30	1	0.25
Cooperatieve Rabobank U.A.	Foreign Bank	–	–	2	61.53	–	–
Corporation Bank	Public Sector Bank	52	123.46	12	97.13	5	0.05
DBS Bank Ltd.	Foreign Bank	2	116.82	–	–	3	0.13
DCB Bank Limited	Private Sector Bank	2	0.11	8	1.51	7	33.17
Dena Bank	Public Sector Bank	24	40.25	11	232.57	3	2.71
Deutsche Bank AG	Foreign Bank	–	–	8	0.13	3	0.04
Doha Bank QSC	Foreign Bank	1	2.76	–	–	–	–
Equitas Small Finance Bank Limited	Scheduled Small Finance Bank	4	0.19	17	2.18	7	0.35
ESAF Small Finance Bank Limited	Non-Scheduled Small Finance Bank	–	–	4	0.18	2	0.05
Export Import Bank of India	National Financial Institution	2	183.98	1	81.91	–	–
Federal Bank Limited	Private Sector Bank	15	12.36	28	3.09	9	26.46
Fincare Small Finance Bank Limited	Non-Scheduled Small Finance Bank	–	–	2	0.05	13	0.48
Fino Payments Bank Limited	Payments Bank	–	–	3	0.90	13	0.64
Firstrand Bank Limited	Foreign Bank	1	0.02	–	–	–	–
HDFC Bank Limited	Private Sector Bank	312	42.21	330	54.39	273	425.20
Hongkong and Shanghai Banking Corporation Limited	Foreign Bank	45	0.94	298	6.51	178	3.26
ICICI Bank Limited	Private Sector Bank	528	35.13	530	851.44	374	25.84
IDBI Bank Limited	Private Sector Bank	91	989.98	94	99.84	99	59.22
IDFC Bank Limited	Private Sector Bank	3	0.39	1	0.02	10	41.90
Indian Bank	Public Sector Bank	70	59.45	47	133.66	20	2.92
Indian Overseas Bank	Public Sector Bank	53	1,115.98	34	372.08	30	2,272.89
IndusInd Bank Limited	Private Sector Bank	16	1.68	36	109.59	51	9.40
Jammu and Kashmir Bank Limited	Private Sector Bank	9	2.69	3	176.17	–	–
Jana Small Finance Bank Limited	Non-Scheduled Small Finance Bank	13	1.16	14	0.98	19	0.74
Karnataka Bank Limited	Private Sector Bank	4	87.26	11	21.55	2	0.03
Karur Vysya Bank Limited	Private Sector Bank	20	24.26	22	30.84	7	2.66
KEB Hana Bank	Foreign Bank	2	0.02	–	–	–	–
Kotak Mahindra Bank Limited	Private Sector Bank	125	51.11	275	12.44	338	9.19
Krishna Bhima Samruddhi Lab Limited	Non Scheduled Local Area Bank	1	0.02	–	–	–	–
Lakshmi Vilas Bank Limited	Private Sector Bank	52	95.34	38	116.94	43	127.27
Nainital Bank Limited	Private Sector Bank	6	0.48	1	0.31	–	–
North East Small Finance Bank Limited	Non-Scheduled Small Finance Bank	–	–	–	–	1	0.18
Oriental Bank of Commerce	Public Sector Bank	42	301.96	24	36.82	8	24.89
Paytm Payments Bank Limited	Payments Bank	–	–	–	–	2	0.02
PT Bank Maybank Indonesia TBK	Foreign Bank	1	17.78	–	–	–	–
Punjab and Sind Bank	Public Sector Bank	22	117.07	3	2.19	–	–
Punjab National Bank	Public Sector Bank	101	14,734.52	108	324.83	33	264.79
RBL Bank Limited	Private Sector Bank	14	1.66	18	8.67	12	2.12
SBM Bank (Mauritius) Limited	Foreign Bank	–	–	2	72.53	1	144.95
Small Industries Development Bank of India	National Financial Institution	5	16.11	8	62.31	1	5.08
South Indian Bank Limited	Private Sector Bank	8	62.83	16	20.28	19	5.32
Standard Chartered Bank	Foreign Bank	314	8.31	86	58.09	48	2.91
State Bank of Bikaner and Jaipur	Public Sector Bank	5	0.24	–	–	–	–
State Bank of Hyderabad	Public Sector Bank	6	7.65	–	–	–	–
State Bank of India	Public Sector Bank	469	444.28	618	294.56	236	59.69
State Bank of Mysore	Public Sector Bank	12	4.24	–	–	–	–
State Bank of Patiala	Public Sector Bank	6	0.45	–	–	–	–
State Bank of Travancore	Public Sector Bank	15	0.67	–	–	–	–
Subhadra Local Area Bank Limited	Non Scheduled Local Area Bank	1	0.01	–	–	–	–
Suryodaya Small Finance Bank Limited	Scheduled Small Finance Bank	5	0.25	7	0.13	–	–
Syndicate Bank	Public Sector Bank	127	133.81	78	613.42	27	84.24
Tamilnad Mercantile Bank Limited	Private Sector Bank	18	63.41	31	78.27	14	25.60
The Bank of Tokyo-Mitsubishi UFJ Limited	Foreign Bank	1	1.24	1	0.19	1	0.03
The Dhanalakshmi Bank Limited	Private Sector Bank	3	0.20	6	68.81	3	4.59
The Industrial Finance Corporation of India Limited	National Financial Institution	1	23.92	–	–	–	–
UCO Bank	Public Sector Bank	31	233.77	41	103.25	27	2.89
Ujjivan Small Finance Bank Limited	Scheduled Small Finance Bank	15	0.31	11	0.23	7	0.33
Union Bank of India	Public Sector Bank	83	612.74	69	480.03	15	29.08
United Bank of India	Public Sector Bank	29	402.85	15	2.22	20	4.60
Utkarsh Small Finance Bank Limited	Scheduled Small Finance Bank	5	0.22	8	0.31	4	0.06
Vijaya Bank	Public Sector Bank	32	16.58	22	145.96	2	0.94
Yes Bank Limited	Private Sector Bank	14	39.61	15	169.30	26	2.01