Persons Held Responsible for Bank Frauds

Data provided by Reserve Bank of India (RBI) on frauds (Amount involved one lakh and above) reported by the Scheduled Commercial Banks and Selected Financial Institutions (FIs) based on the dates of occurrence for last eleven years is presented in Annexure -1.

Government has taken comprehensive steps to reduce the incidence of frauds in banks. The steps taken 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- 

1. 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;
2. examination be initiated for willful default immediately upon reporting fraud to RBI; and
3. 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 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 (LOCs).

 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.

The impact of the above steps is reflected in Reserve Bank of India (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.

As per RBI's Master Directions on Frauds, frauds may occur due to number of reasons, some of which may also involve staff accountability. As per RBI's instructions, staff accountability in all bank fraud cases is to be examined quickly, and such cases may be closed only when the examination of staff accountability has been completed. Bank-wise data provided by RBI on number of staff side action initiated/taken against bank employees involved in frauds (Amount involved >= 1 Lakh) reported by banks for the years 2015-2017 is at Annexure-2.

As per RBI's Master Directions on Frauds, Banks are required to lodge the complaint with the law enforcement agencies immediately on detection of fraud. Data regarding number of persons apprehended for these acts is not centrally maintained.

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