Fifty Large-Value Fraud Cases Registered

Banks and financial institutions reported 50 cases of large-value frauds (Rs one crore and above) involving Rs 506.34 crore in 2000-01, as against 49 cases involving Rs 431.59 crore in the previous financial year. In calendar 2000, commercial banks reported 3,072 cases of frauds involving an amount of Rs 672.59 crore.

To tackle these frauds, the Committee on Legal Aspects of Bank Frauds headed by N L Mitra, in its report submitted to the Reserve Bank of India (RBI) in September, has recommended that serious financial frauds should be treated as criminal offence and the burden of proof should be shifted on the accused to prove absence of fraud.

 

The RBI, in its report on Trend and Progress of Banking in India - 2000-01, said: Major factors which facilitated the perpetration of frauds in 2000-01 included, among others, non-observance of the laid-down systems and procedures by the bank functionaries, nexus or collusion of the bank staff with the borrowers/ depositors, negligence on the part of the dealing officials/ branch managers, commission of fraud by the bank staff themselves, failure of internal control system and inadequate appraisal of credit proposals and ineffective supervision over advances.

Out of the 50 cases of large-value frauds reported during 2000-01, in five cases, bank officials themselves perpetrated the frauds. In as many as 10 cases, nexus or collusion of bank officials with the fraudsters was observed. In respect of a few cases of fraud involving pay orders reported by certain banks recently, nexus of a co-operative bank with the perpetrators of fraud was also observed.

The Mitra Committee, which was constituted by the Board of Financial Supervision, categorised different types of frauds and proposed legislative attention to deal with the serious ones only.

It has also recommended establishment of a special bureau, court and prosecutors to deal with major frauds and provided certain operational guidelines for the bureau, court and the recovery of the defrauded amount.