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

The analysis focussed on the modus operandi, amount involved, type of lending loopholes that facilitated perpetration of the fraud concerned and the systemic improvements required to plug the gaps

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Probity watchdog Central Vigilance Commission (CVC) has completed a first-of-its-kind analysis of the top 100 banking frauds, including those in the jewellery and aviation sectors, and shared its findings with the RBI, ED and CBI among others, Vigilance Commissioner T M Bhasin said Tuesday.

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

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 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, Bhasin said.

"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 RBI (Reserve Bank of India), in order to plug the loopholes observed by the Commission," he told PTI.

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

The measures suggested 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, Bhasin said.

The move assumes significance in the wake of high profile bank fraud cases involving absconding billionaire 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, 2017.

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

"The RBI has also confirmed to the commission that inputs given by the CVC are very useful and shall be used for systemic improvements to mitigate the risks," he said, sharing the reason behind initiating the analysis of the frauds.

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 done by the commission as a preventive vigilance tool by utilizing 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 investigative agencies, fixing staff accountability and recovery measures, etc. 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 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.

There are different modus operandi, loopholes and systemic improvements suggested by the CVC in the report.