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-
- all accounts exceeding ₹ 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 ₹ 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 ₹ 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 ₹ 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 ₹ 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 | |
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 ₹ 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 ₹ 50 crore. Comprehensive measures have been taken to prevent frauds including directions to banks to examine all NPA accounts above ₹ 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 ₹ 50 crore. Comprehensive measures have been taken to prevent frauds including directions to banks to examine all NPA accounts above ₹ 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 ₹ 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 |
Source: RBI
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Bank fraud prevention measures strengthen detection, due diligence and enforcement for large NPAs, with legal and institutional reforms. The Government has established a framework requiring banks to examine large-value NPAs for possible fraud, report findings to NPA review committees, initiate wilful-default examination upon reporting to the central bank, and seek intelligence inputs. PSBs must enhance due diligence for large loans by obtaining certified passport copies of promoters/directors, consider publishing photographs of wilful defaulters per Board policy, rotate officials and request travel-restriction measures. Reforms include the Fugitive Economic Offenders Act, a Central Fraud Registry, the National Financial Reporting Authority and technical connectivity between core banking and messaging systems; central bank data shows detected frauds by institution.
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