RBI working with FinMin to bring to book loan fraudsters

The Reserve Bank is working closely with the Finance Ministry to facilitate criminal investigations by law enforcement agencies to bring to book loan fraudsters, Deputy Governor R R Gandhi has said.
Containing frauds means focussed action by all stakeholders, not leaving any flank uncovered, Gandhi said during an industry event here yesterday.
"One of the flanks was the criminal investigations done by law enforcement agencies and bringing to book fraudsters soon after a fraud is committed.
"To facilitate this and smoothen the process of commencing the investigations the Reserve Bank has been working with the Ministry of Finance and coordinated actions have been initiated," Gandhi said.

He said banks should tone up the loan appraisal process to prevent frauds, especially loan frauds, as it can weed out many undesirable or flawed proposals that may eventually turn out to be a fraud.
"It requires going beyond the given and independently gathering intelligence on the potential borrower. This requires accessing public databases, news reports on any adverse governmental action like raids," Gandhi said.

He said the loan appraisal process should also take into account problems brewing in the industry, in the promoter's group.
It will help in assessing the direction in which a company's operations will go and whether there is inherent resilience in promoters and project to face rough weather, he added.

Subsequent monitoring also plays a vital role in identifying potential frauds, he said.
RBI has prescribed time limits within which certain actions like investigating for fraud should be completed and a decision on whether an account is indeed a fraud or not is made, the Deputy Governor said.
He also emphasised that there is a need on part of the Boards to ask right questions.
They need to assess the robustness of the internal controls, with each new threat detected and be in a position to get the data analysed in a holistic fashion, he said.
"Our recent initiatives in separation of the post of Chairman and Managing Director in banks is also aimed at giving the much-needed breadth of vision to the Chairman without being harried by the day to day running of a huge organisation," he added further.