Lok Sabha Question No. 3653 (UNSTARRED), answered on 2018-03-16
Subject: White Paper on Health of the Banking Sector
Ministry: FINANCE
Asked by: THOKCHOM MEINYA

## GOVERNMENT  OF INDIA

## MINISTRY OF  FINANCE DEPARTMENT  OF FINANCIAL SERVICES LOK SABHA

UNSTARRED  QUESTION  NO: 3653 TO BE ANSWERED  ON THE 16 th  MARCH,  2018/PHALGUNA 25, 1939 (SAKA)

## QUESTION WHITE PAPER ON HEALTH OF THE BANKING  SECTOR

## 3653:  DR. THOKCHOM  MEINYA:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the Government  is bringing  out a White  Paper on the health  of the banking sector;
- (b) if  so,  whether  it would  also publish  a complete  list  of the Non-Performing Assets (NPAs) of all banks  both public  and private  as on 31 Dec. 2017 and if so, the details thereof;
- (c) whether   the  Government   has  a  comprehensive   procedure   to  deal  effectively   with fraudulent  or malafide NPAs;
- (d) if so, the details  thereof;  and
- (e) if not,  whether  the Government  is contemplating for a stringent  law  and procedure to deal with  fraudulent  NPAs?

## ANSWER To be answered by THE MINISTER OF  STATE  IN THE  MINISTRY OF  FINANCE

## (SHIV PRATAP  SHUKLA)

(a)  and  (b):  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 brings  out a detailed  Financial  Stability Report  as a biannual  publication, presenting, inter alia , its overall  assessment of the soundness  and resilience  of the banking  sector,  and a  discussion   of  performance,   credit   and  deposit   growth,   asset  quality, profitability etc. With   regard to  publishing   of  complete   list   of  NPAs,   RBI  has  stated  that   in  terms   of section   45E  of  the  Reserve   Bank of  India  Act,   1934,  it  is  prohibited   from disclosing credit   information. Section   45E  provides   that   credit   information submitted   by   a  bank shall  be treated  as confidential  and not to be published  or otherwise  disclosed. (c) to (e): Comprehensive arrangements  and measures,  including  procedures,  have been instituted  to deal effectively  with  frauds  and wilful  defaulters  responsible  for NPAs.

To deal  with   frauds,   RBI  has  issued  a  Master   Circular on  Frauds   to  banks,   requiring reporting  of frauds beyond  a threshold  amount  to the police,  monitoring and follow-up of  cases  by   a  special   committee,   quarterly placement   of  information   before  Audit Committees  of bank  Boards, and annual  review  of frauds by  banks.  These cover, inter alia, preventive   measures,   fraud   detection   systems,   systemic   lacunae,   remedial   action, monitoring   of  progress   of  investigation and  recovery,   and  staff  accountability. Other measures  taken  by  RBI include  the following:

- (i) a framework  for dealing  with  loan  frauds of Rs. 50 crore  and above,  under  which banks classify potential fraud accounts as red-flagged accounts based on observation/evaluation of early  warning  signals,  and take  timebound  action;
- (ii) an  online   searchable   database   of  frauds  reported   by   banks,   in  the  form  of Central  Fraud  Registry,  as a tool  of timely  identification, control  and mitigation of fraud risk  and for carrying  out due diligence  during  credit  sanction  process;
- (iii) issuance  of caution  advices by  RBI, detailing  names of fraudsters  and their modus operandi;
- (iv) issuance of various master circulars to banks, with a view to restricting imprudent  practices  and ensuring  sound procedures;  and
- (v) subjecting  the systems  and procedures  in banks  to supervisory review by  RBI.

To deal  with   wilful   defaulters,   as  per  RBI's  instructions, they   are  not   sanctioned   any additional  facilities  by  banks  or financial  institutions, their  unit  is debarred  from floating new ventures  for five years,  and lenders  may  initiate  criminal  proceedings  against  them, wherever   necessary.   As  per  SEBI  Regulations, wilful   defaulters   and  companies   with wilful  defaulters  as promoters/directors are debarred  from accessing capital  markets  to raise funds.  The  Insolvency   and  Bankruptcy Code   has  been  amended   to  debar  wilful defaulters  from participating in the insolvency  resolution  process.

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.