The Central Vigilance Commission (CVC) has reconstituted the advisory board on Banking and Financial Frauds (ABBFF) that conducts the first level examination of bank frauds before recommendations or references are made to investigative by agencies such as Central Bureau of Investigation (CBI).

The reconstituted APBFF will be chaired by Suresh N Patel, former Central Vigilance Commissioner. Besides the Chairman, there are four Members and the tenure of the Chairman/ Members would be for two years with effect from August 21, according to an order issued by the CVC.

The four Members of the advisory board are Ravikant, a retired IAS officer; Rajnikant Mishra, former Director General, BSF; David Rasquinha, former MD of Exim Bank; and Partha Pratim Sengupta, former MD & CEO of Indian Overseas Bank.

The ABBFF has been empowered to examine the role of officials/ wholetime directors (including ex-officials/ ex-wholetime directors) in public sector banks, public sector insurance companies; and public sector financial institutions in case of frauds amounting to ₹ 3 crore and above. 

The CVC has now stipulated that all PSBs, public sector insurance companies, and public sector financial institutions should refer all matters of frauds involving ₹3 crore and above to the board for advice. 

This has to be done before initiation of criminal investigation and the competent authority should consider the advice tendered by ABBFF regarding involvement of criminality/malafide of the officials, in all such cases, the CVC order said.

CVC or CBI may also refer any case/technical matter to the ABBFF for its advice.

ABBFF has also been empowered to periodically carry out frauds analysis in the financial system and give inputs, if any, for policy formulation related to the frauds, to RBI and CVC.

The ABBFF — which will be headquartered in New Delhi — will have to ordinarily, within a month of receipt of the initial reference, tender the advice as may be requisitioned by the Ministry/Department/CVC or the investigation agency ( including the Delhi Special Police Establishment) 

Interestingly, the Indian Banks Association (IBA) suggestion of introduction of a sun set clause — this would have meant that no action can be taken by any investigative agency against a banker for a credit decision after lapse of a specified period —has not found favour with CVC even this time round.

Minister of State for Finance Bhagwat Karad had recently informed the Lok Sabha in a written reply about the comprehensive steps being taken by the government, RBI and public sector banks to strengthen the fraud risk management mechanism in banks.

Karad had also highlighted that in respect of loan frauds, recovery action is initiated through various recovery mechanism, available with banks, such as filing of the suit in civil courts or in debt recovery, tribunals, action under the SARFAESI law, filing of cases in the National  Company Law Tribunal under the insolvency and bankruptcy code, through negotiated settlement/compromise etc.

Karad also said that directorate of enforcement (ED), the agency mandated for investigation and prosecution of cases under the Prevention of Money Laundering Act 2002 (PMLA), has apprised that it has recorded 757 cases involving bank fraud in public and private sector banks under the provisions of PMLA in the last 10 years and 36 cases in the current year. 

It has been noticed that in 10 cases, 14 persons have fled the country and of these, six persons have been declared as fugitive economic offenders and seven persons declared as proclaimed offenders. In cases where persons had fled the country, as on July 25,2023, assets amounting to ₹15, 805.91 crore have been confiscated and assets amounting to ₹15, 113 crore has been restituted to the PSBs, Karad said.