Banks to report frauds of Rs 1 crore and above to CVC

With several high-ticket alleged frauds coming to fore, the Central Vigilance Commission has now made it mandatory for public sector banks to report to it all such matters involving funds over ₹1 crore.

Based on the reports, the anti-corruption watchdog, which has hired four officers of General Manager rank from bank as advisors, will recommend whether CBI probe can be ordered.

According to CBI data, in 2015, the agency had probed 171 cases of bank frauds involving funds of ₹20,646 crore. In addition, CBI is also investigating the Ponzi schemes involving funds of over Rs 1.20 lakh crore.

The Commission will also call regular monthly meetings of senior officials of Reserve Bank of India (RBI), CBI and banks to monitor probe in suspected bank frauds of Rs 50 crore and above.

The banks have been asked to share their reports of Fraud Monitoring and Reporting (FMR) mechanism with the CVC in the suspected fraud cases of Rs one crore and above.

Till now this report was shared with the RBI only, Vigilance Commissioner T M 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 to ensure that systemic changes can be brought in to prevent such cases being repeated, he said.

“Frauds were being reported by the Central Vigilance Officers of the banks to the RBI through the Fraud Monitoring and Reporting (FMR) mechanism. Now the Commission has decided that fraud of Rs 50 crore and above will be regularly followed up by the CVC.

“For this purpose, we will convene regular meetings where concerned people of CBI and RBI will be called and BSFC concerned banks,” T M Bhasin said. More PTI ABS SMJ 10311524

The move comes following the difference in the definition of “fraud” in the banks and investigating agencies. CBI had complained that banks were not forthcoming with the reporting of frauds to it.

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, needs serious thoughts.

“In the case of banks, there is some misunderstanding in what constitutes fraud. Fraud as understood in the banking sector is different from the fraud as understood by investigating agencies under IPC and CrPC. Banks do report NPAs and frauds to Reserve Bank as per their guidelines,” Central Vigilance Commissioner K V Chowdary said.

He said after consultation with RBI, changes have been brought in to the system.

A special chapter has been added in the Vigilance Manual for Banking system with updated one to be unveiled by Prime Minister Narendra Modi at a function of CVC on November 7.

The CVC has defined malafide and bonafide actions which caused misunderstanding between banks and investigating agencies.

Bhasin clarified that CVC was not looking into such cases but now Banks will have to undertake monthly meetings in cases of suspected frauds of Rs 50 crore and above and reporting of fraud cases of Rs one crore and above.

“The Commission has powers under section 8(1)(d) of the CVC Act to direct CBI to undertake investigations. So we don’t need any help or co—ordination with Banks’ CVO. It is suo moto case will be handed over to CBI. In the past one year, we have referred about 18—20 cases to CBI related to bank fraud,” Bhasin said when asked whether cases will be referred to CBI by the CVC or the banks.

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