Lok Sabha Question No. 6602 (UNSTARRED), answered on 2018-04-06
Subject: Special Audit of State-owned Lenders
Ministry: FINANCE
Asked by: GAURAV GOGOI, JYOTIRADITYA MADHAVRAO SCINDIA

## GOVERNMENT  OF INDIA MINISTRY OF FINANCE DEPARTMENT  OF FINANCIAL  SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 6602 TO BE ANSWERED ON THE 6 TH  APRIL 2018/  CHAITRA  16, 1940  (SAKA) Special Audit  of State-owned Lenders

## 6602. SHRI GAURAV  GOGOI: SHRI JYOTIRADITYA M.  SCINDIA:

Will  the Minister  of FINANCE  be pleased to state:

- (a)     whether  in view  of spate of banking  frauds in the country,  the Government  / Reserve  Bank of India has initiated  a special  audit  of State-owned  lenders  especially  relating  to issuance  of Letters  of Undertakings (LoUs) by them;
- (b)      if so, the time  by  which  the special  audit  of State-owned  lenders  is likely  to be completed  and progress  of the report;  and
- (c)     whether  the Government  proposes to take  steps to audit  the bank  accounts  regularly and ensure that  the defaulters  not flee to any  foreign  country  and if so, the  details  thereof;

## ANSWER

The Minister  of State in the Ministry  of Finance (SHRI SHIV PRATAP  SHUKLA)

(a) to (c): The Reserve  Bank  of India (RBI) is the regulator  and supervisor  of the banking  system,  as per powers conferred  by  relevant  provisions  of the Banking  Regulation  Act,  1949, the Reserve  Bank of India Act,  1934, and other  relevant  statutes.  RBI has informed  that  the guidelines/norms and procedure  for audits have been issued by RBI, in consultation  with  Government  of India.  Accordingly, banks  are to put in place appropriate  controls and  audit   procedures   for  their   business activities.   Public   Sector   Banks   (PSBs)  are subject   to  annual   Statutory Central   Audit and  Statutory   Branch   Audit. In  addition,   Risk-Based   Internal   Audit and  Concurrent Audit are undertaken   by   all  PSBs  in  terms   of  RBI  guidelines.   Further, quarterly  review   of  accounts   is  conducted   by Statutory  Central  Auditors.  Stock  Audit  is undertaken  by  banks  as per their  policies.  RBI has further  apprised that,  in the wake  of SWIFT-related  fraud involving  significant  amount  reported  recently  by  Punjab  National  Bank (PNB), it  has  constituted   an  Expert   Committee, to  look   into, inter  alia, the  factors   leading   to  an  increasing incidence  of frauds,  and the role  and effectiveness  of various  types  of audits  conducted  in banks  in mitigating the incidence  of such frauds.

With  regard  to details  concerning  ensuring  that  defaulters  do not flee to foreign  country, the Ministry  of External Affairs (MEA) has  informed   that   in  case  requests   are  received   from  agencies   concerned   for  revoking   or suspending   passports of  defaulters,   the  same  is carried   out  expeditiously in  MEA.   Further,  in  order to  deter economic   offenders  from evading   the  process  of  Indian   law   by   remaining   outside   the  jurisdiction of  Indian courts,  Government  has introduced  the Fugitive  Economic  Offenders  Bill,  2018 in Parliament. The bill  provides for  attachment   of  property   of  a  fugitive   economic   offender,   confiscation   of  such  offender's   property, and disentitlement of the offender from defending  any  civil  claim.  In addition,  with  a view  to enable  banks  to inform relevant  authorities  of passport  details,  if need arises,  Government  has advised all Public  Sector  Banks  to obtain  a certified  copy  of the passport  of the promoters/directors and other  authorised  signatories  of companies  availing of loan facilities  of Rs. 50 crore  and above.  The advisory  further  states that  in existing  cases, where  loans of Rs. 50 crore  and above are given,  banks  may collect passport  details.