With several high-ticket alleged frauds coming to the
fore, the Central Vigilance Commission(CVC) has now made it mandatory for
public sector banks to report to it instances involving over ₹1 crore.
Based
on the reports, the anti-corruption watchdog, which has hired four
officers of General Manager rank from banks as advisors, will recommend
whether a CBI probe can be ordered.
According to CBI
data, in 2015, the agency had probed 171 cases of bank frauds involving
₹20,646 crore. In addition, the CBI is investigating Ponzi schemes
involving over ₹1.20 lakh crore.
The Commission will
also call regular monthly meetings of senior officials of Reserve Bank
of India, CBI and banks to monitor probes in suspected bank frauds of
₹50 crore and above.
The banks have been asked to
share their reports of Fraud Monitoring and Reporting (FMR) mechanism
with the CVC in suspected cases of ₹1 crore and above.
Till now this report was shared only with the RBI, Vigilance Commissioner TM Bhasin said.
The
banks will also now have to report the modus operandi of all the
alleged frauds to the CVC which will share these details with other
banks in order to ensure that systemic changes be brought in to prevent
repeat of such cases, he said.
“Frauds
were being reported by the Central Vigilance Officers of the banks to
the RBI through the Fraud Monitoring and Reporting mechanism. Now the
Commission has decided that frauds of ₹50 crore and above will be
regularly followed up by the CVC,” Bhasin said.
The move follows the difference in the definition of
“fraud” by banks and investigating agencies. The CBI had complained that
banks were not forthcoming with reporting of frauds to it.
What’s fraud?
CBI
Director Anil Sinha had recently red-flagged rising cases of bank
frauds saying the issue of delay in identifying and reporting frauds,
which allows borrowers to siphon off funds before investigations are
taken up, need serious thought.
“In the case of
banks, there is some misunderstanding in what constitutes fraud. Fraud
as understood in the banking sector is different from fraud as
understood by investigating agencies under IPC and CrPC. Banks do report
NPAs and frauds to the Reserve Bank as per their guidelines,” Central
Vigilance Commissioner KV Chowdary said.
He said after consultation with the RBI, changes have been brought in to the system.
A
special chapter has been added in the Vigilance Manual for Banking
system with an updated one to be unveiled by Prime Minister Narendra
Modi at a CVC function on Nov 07,2016
The CVC has defined mala fide and bona fide actions which caused misunderstanding between banks and investigating agencies.
Bhasin
clarified that the CVC was not looking into such cases, but now banks
will have to hold monthly meetings in cases of suspected frauds of ₹50
crore and above and reporting of frauds of ₹1 crore and above.
