​Now CBI to bail out banks from fraudsters

The case of borrowing from a bank and disappearing without paying the debt having risen, the government has for the first time also created a cell in the Central Bureau of Investigation to deal with frauds detected by banks and set out guidelines for them to follow.

As per a news report by The Economic Times, a loan of over Rs 50 crore goes into default, bankers will have to figure out whether the borrower is a fraudster.
"All accounts exceeding Rs 50 crore, if classified as NPA (non-performing assets), shall simultaneously be examined by the banks from the angle of a possible fraud. A report would be placed before the bank's committee for review of NPAs on the findings of this investigation," said a letter by the finance ministry to bank CEOs.

The letter titled 'Framework for Timely Detection, Reporting, Investigation Relating to Large Value Frauds' is aimed at hastening and streamlining the practice followed by banks in reporting frauds. Public sector banks reported over 2,100 loan fraud cases amounting to Rs 11,022 crore between April and December 2014 as against 2,593 cases involving Rs 7,542 crore in 2013-14, according to data released by the Reserve Bank of India.

As per the news report by the financial daily, the RBI has proposed to set up a Central Fraud Registry that will house data on borrowers who cheat banks and introduced the concept of a Red Flagged Account, where banks can act on suspicion of fraudulent activity thrown up by one or more early-warning signals.


The news report further reads, the CBI should give a written comment to the chief vigilance officer of the bank within five working days of receiving the complaint. Banks should provide inputs sought by the CBI within four days of receiving its comments. The finance ministry has standardised the data that banks need to provide to the investigative agency and asked them to have a nodal officer for frauds above Rs 50 crore. A sharp rise in defaults has eaten into the bottom line of banks, prompting both lenders and the RBI to take stern action against willful defaulters. According to data released by bank unions, lenders had 4,387 cases of willful defaults with outstanding loans of Rs 84,579 crore as of March 2014.