RBI may consider fraud registry to deal with financial crimes

Banking system should debar fraudsters from conducting any banking transaction: K C Chakrabarty

The Reserve Bank could consider setting up of a Fraud Registry on the lines of Credit Information Bureau to check criminal activities in the financial sector.

"Establishment of a Fraud Registry on the lines of credit information bureau could be considered by the (central bank)," said RBI Deputy Governor K C Chakrabarty here while addressing a conference on 'Financial Fraud and Risk Prevention'.

He said banking system should debar fraudsters from conducting any banking transaction and make his living in society difficult.

Sharing the information that most of the frauds relate to high value transactions of advances (Rs 1 crore and above), he said unfortunately detection of advance-related cases is after it is classified as the NPA (Non-performing Asset).

"One bank reports the case as fraud but other banks with similar deficiencies in the same account continues to treat the account as performing," he said, adding banks do not exchange information amongst themselves.

"When time is good rich people steal, when time is bad, poor people also steal," he quipped.

Chakrabarty said the number of reported frauds in the banking system over the last 10 years is 1,76,547, and the value is pegged at Rs 31,400 crore.

In the last 25 years, 61 frauds of over Rs 50 crore each had taken place and the total amount involved in these was Rs 13,000 crore, he said, adding that the bank accounts involved in these 61 cases were 208.

The deputy governor stressed the need for clearly defining 'fraud', citing cases where frauds are reported years after the financial mishandling.

In his addresses, M J Joseph Additional Secretary and Chief Vigilance Officer in the Ministry of Corporate Affair said, the MCA is in the process of setting up a forensic lab for detecting corporate frauds.

Chakrabarty said the number of frauds has not really gone up.

"What has increased is the amount that goes into it. This means, richer people have started stealing more."

He said that the serious frauds investigation officer (SFIO) will have more teeth, including powers to arrest, under the new Companies Bill.

There are provisions in the bill that recognise the role of independent directors and committees of the board, like Audit Committee, he said.

Assocham President Rana Kapoor said: "We must have zero tolerance for frauds. We need actionable measures by improving financial literacy in our country so prevent gullible customers falling prey to frauds like Ponzi schemes."