The Ministry of Finance has taken number of steps to eliminate fraudulent banking practices. This was stated by Shri Anurag Thakur Minister of State for Finance & Corporate Affairs in a written reply to a question in the Rajya Sabha today. He stated that steps include, inter-alia, the following:

1. 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-

i. 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;

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.

2. 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.

3. 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 the instructions of RBI 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.

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

5. 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.

6. 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.

RM/KMN

Fraud detection framework strengthens bank scrutiny and reporting of large non-performing accounts and wilful defaults. A regulatory package requires banks to apply a structured fraud detection and reporting framework for large NPAs, initiate wilful default proceedings upon detection, obtain inter-agency borrower intelligence, and strengthen due diligence by collecting certified identity documents and publishing wilful defaulter information under board-approved policies; administrative controls such as rotational transfers and Look Out Circular requests are mandated. Complementary measures include an independent audit regulator to enforce audit standards, and a statutory regime enabling attachment and disentitlement of fugitive economic offenders, together with freezing of inoperative company accounts to enhance systemic transparency.