CVC analyses top 100 bank frauds, shares report with RBI, ED, CBI

CVC analyses top 100 bank frauds, shares report with RBI, ED, CBI

Courtesy : Agencies19/10/2018 08:34

New Delhi: The Central Vigilance Commission (CVC) has completed a first-of-its-kind analysis of the top 100 banking frauds, including by those in jewellery and aviation sectors, and shared its findings with the RBI, ED and CBI among others, a top official said.

The analysis focussed on the modus operandi of the fraud, amount involved, type of lending (consortium or individual), anomalies observed, loopholes that facilitated the perpetration of the fraud and the systemic improvements required to plug the gaps.

The frauds were classified and analysed for 13 sectors including gem and jewellery, manufacturing and industry, agro, media, aviation, service and project, discounting of cheques, trading, information technology, export business, fixed deposits, demand of loan and letter of comfort.

The modus operandi of these top 100 loans has been thoroughly analysed and various loopholes or lapses have been identified, Vigilance Commissioner T M Bhasin said on Tuesday.

"Based on the findings, various industry-specific suggestions for systemic improvement have been given in the final report, which have also been sent to the Department of Financial Services and the Reserve Bank of India (RBI), in order to plug the loopholes observed by the commission," he told news agency PTI.

Bhasin said the finding have also been shared the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI).

The measures suggested to plug the loopholes include strengthening of standard operating procedures (SOPs) and the monitoring system, and also highlighting the role of controlling offices so as to examine the aspect of quality of business, he said.

The move assumes significance in the wake of high-profile bank fraud cases involving absconding billionaire diamantaire Nirav Modi and liquor baron Vijay Mallya among others.

The report, which has also been shared with the Ministry of Corporate Affairs, carries analysis of large value-frauds reported since March 31 last year.

Bhasin said the analytical study was initiated by the commission as a preventive measure to minimise the occurrence of such type frauds in the future.

"The RBI has confirmed to the commission that inputs by it are very useful and shall be used for systemic improvements to mitigate the risks," he said.

Bhasin, a former chairman and managing director of the Indian Bank, said the intention of the commission is to bring about awareness among the field functionaries by enhancing their knowledge towards the existing lapses, so that frauds of similar nature do not recur.

"These studies have been conducted by the commission as a preventive vigilance tool by utilising its vast experience of handling various cases of frauds and staff-accountability related matters," he said.

Bhasin said as a conscious decision and with a view to maintaining discreteness, the names of borrower accounts or entities, and the names of the banks have not been disclosed in the report.

"However, steps are being taken for all encompassing actions, such as investigation by the premier probe agencies, fixing staff accountability and recovery measures, and others for effective action," he said.

Giving details of the frauds in the gem and jewellery sector, the report cited different modus operandi by private companies, including inflating the valuation of diamonds with the malafide intention to avail higher credit facilities from the lenders. It cited absence of effective mechanism in banks and certain other loopholes that led to frauds in this sector and suggested systemic changes.

"The gem and jewellery sector’s credit facilities to these companies increased manifold within a short span of time in an effort by the banks to increase their credit dispensation. There should have been some segment related limits on such type of credit exposures," the report suggested.

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