In light of the biggest banking scam in the Punjab National Bank (PNB) that rocked the country this month, the government has started its ambitious reform agenda for timely detection, reporting, and investigation of large value bank frauds. The Department of Financial Services has asked all public sector banks to detect bank frauds and consequential wilful defaults in 15 days and refer cases to the Central Bureau of Investigation (CBI). The department has said all the non-performing assets (NPA) above Rs 50 crore will be examined for possible fraud.
These banks have been asked to involve Enforcement Directorate (ED) or Directorate of Revenue Intelligence (DRI) to inquire cases related to violations under the Prevention of Money Laundering Act and the Foreign Exchange Management Act.
Department of Financial Services Secretary Rajeev Kumar said the banks have been asked to ensure “pre-emptive action and indentify gaps” in addition to make themselves ready for “rising ops (operations) and tech risks”. The PSB also need to assign clear the accountability to their senior functionaries to ensure the immediate implementation of the agenda.
Executive directors and chief technology officers of PSBs have been asked to prepare a blueprint to enhance preparedness for combating increasing risks, Kumar tweeted.
Under the government’s clean and responsive banking plan, each PSB will form a group comprising EDs and CTOs. The panel will find areas where the respective bank will have to improve and “learn” from best practices.
The government ‘bank reform plan’ has been launched under its Enhanced Access and Service Excellence (Ease) programme.
Presenting the Union Budget 2018-19, Finance Minister Arun Jaitley had said the Ease programme had been integrated with the government’s bank recapitalisation worth Rs 2.11-lakh crore.
On February 14, PNB detected the fraud at its Mumbai branch wherein diamond merchant Nirav Modi and associates allegedly cheated the bank by acquiring fraudulent letters of undertaking (LoUs) from one of its branches for overseas credit from other Indian lenders. In a late night filing to stock exchanges on Monday, the PNB said the total fraud estimate could exceed by over Rs 1300 crore as the probe deepens in the case.
“The quantum of reported unauthorised transactions can increase by Rs 1,300 crore,” said the PNB. The hiked-up defrauded amount now stands at over Rs 12,700 crore.
Ever since the PNB scam has unfolded, the investigation agencies have confiscated several properties of Nirav Modi. The fraud revelation that started from Rs 280 crore has reached over Rs 12,700 crore as the agency officials warn of many more skeletons in the closet.
What is Ease programme for banks?
- Prompt fraud identification and action within prescribed deadlines.
- CVOs (chief vigilance officers) to vet complaint and coordinate with the CBI for frauds exceeding Rs 50 crore.
- NPA cases above Rs 50 crore to be examined for fraud.
- Reported frauds to be examined for wilful default.
- Banks to seek borrower status report from the Central Economic Intelligence Bureau (CEIB) on account turning NPA, CEIB to revert in a week.
- Bank to involve the Enforcement Directorate or the Department of Revenue Intelligence if conditions warrant.