(a) whether the Government is aware of many National Banks losing their credibility due to big bank scams, if so, the details thereof, bank-wise;
(b) whether it is true that in these scams the bank employees are involved;
(c) if so, the details thereof including the amount involved therein at present, bank-wise; and
(d) the corrective steps taken by the Government in this regard?
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(a) to (d) 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—
(i) 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;
(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 Rs. 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 Rs. 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. Further, based on the date of occurrence, the number of bank frauds involving an amount of Rs. 1 lakh and above for the last five financial years, as reported by Public Sector Banks to RBI, has declined steadily, and the details, including amount involved therein, are as under:
FY of occurrence Number Amount (in crore Rs.)
2014-15 2,630 20,005
2015-16 2,299 15,163
2016-17 1,745 24,291
2017-18 1,545 6,916
2018-19 739 5,149
Bank-wise details are at Annex-I.
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 details of staff accountability fixed in cases of fraud are at Annex-II.
To strengthen PSBs, Government has implemented a comprehensive 4R’s strategy consisting of recognition of NPAs transparently, resolution and recovering value from stressed accounts, recapitalising PSBs, and reforms in PSBs and financial ecosystem to ensure a responsible and clean system. Financial Gains to PSBs from this strategy are now amply visible in financial terms. Gross NPAs of PSBs, as per RBI data on global operations (including provisional data for March 2019, as reported on 2.7.2019), have reduced over the last financial year by Rs. 1,06,032 crore, and recovery of Rs. 3,09,568 crore has been effected over the last four financial years (excluding recovery in IDBI Bank Limited made during 2018-19) has been effected by these banks over the last four financial years, including a record recovery of Rs. 1,21,076 crore in the last financial year. These gains, coupled with the decline in the incidence of frauds, have enhanced the credibility of PSBs.
Note: NPA Figures cited above for PSBs include those for IDBI Bank Limited, which was recategorised as a private sector bank by RBI with effect from 21.1.2019.
*****