Money & Banking

CVC asks banks to report frauds of ₹1 cr and above

PTI New Delhi | Updated on January 16, 2018 Published on October 31, 2016

Vigilance Commissioner TM Bhasin

Anti-corruption watchdog will recommend whether CBI probe needs to be ordered

With several high-ticket alleged frauds coming to the fore, the Central Vigilance Commission 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 November 7.

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.

Published on October 31, 2016
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