Bank Reforms to be proactive
Comprehensive
steps for timely checking &
Early
detection of financial frauds!
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:
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-2. 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;
3.
Examination be initiated for wilful default immediately upon reporting fraud to
RBI; and 4. Report on the borrower be sought from the Central Economic
Intelligence Bureau in case an account turns NPA. 5. 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.
6.
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.
7.
For enforcement of auditing standards and ensuring the quality of audits,
Government has established the National Financial Reporting Authority as an
independent regulator. 8. 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.
9.
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. There are
several other steps too!
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