Lok Sabha Question No. 304 (STARRED), answered on 2018-03-16
Subject: Fraudulent Loans under MUDRA
Ministry: FINANCE
Asked by: MUTHAMSETTI SRINIVASA RAO (AVNTHI)

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

## STARRED QUESTION NO. *304 TO BE ANSWERED ON 16 TH  MARCH, 2018 / PHALGUNA 25, 1939 (SAKA)

## 'Fraudulent Loans under MUDRA'

## QUESTION

*304. SHRI MUTHAMSETTI SRINIVASA RAO (AVANTHI):

- Will the Minister of FINANCE be pleased to state: (a)  whether  the  Central  Bureau  of  Investigation  (CBI)  has  registered  a  fresh  case related to fraudulent loans issued/granted under the Micro Units Development and Refinance Agency (MUDRA) Scheme and if so, the details thereof; (b) whether the fraud was reported in the Punjab National Bank, which is in the midst of another scam worth Rs. 114 billion; and (c)  if  so,  the  details  thereof  and  the  stringent  steps  taken/being  taken  by  the
- Government to put a lid on such frauds in the banking sector?

## ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE

(SHRI ARUN JAITLEY)

- (a),(b) & (c ): A statement is laid on the Table of the House.

## STATEMENT REFFERED IN REPLY TO THE LOK SABHA STARRED QUESTION NO  *304  TO  BE  ANSWERED  0N  16 TH   MARCH,  2018  BY  SH  MUTHAMSETTI SRINISAVA  RAO  (AVANTHI)  REGARDING  FRAUDULENT  LOANS  UNDER MUDRA

(a)& (b): As per information furnished by Central Bureau of Investigation (CBI),a case based on source information has been lodged by it in February, 2018 against a bank official at the Barmer branch of Punjab National Bank (PNB) for allegedly sanctioning and disbursing 26 Pradhan Mantri Mudra Yojana  (PMMY) loans in violation of extant rules and regulations of the Bank, thereby allegedly causing wrongful loss to the Bank and corresponding wrongful gain to himself and other unknown persons.

As per PNB, the irregularities committed by the branch official of the Barmer Branch (Rajasthan), relate to procedural lapses in 26 loans sanctioned under Pradhan Mantri Mudra Yojana (PMMY) during the period September, 2016 to March, 2017. Lapses  noticed  by  the  bank  relate  to  pre  sanction/  physical  verification,  end  use verification,  reports  prepared  without field  verification  etc.    Procedural  lapses  were noticed in these accounts and only five accounts out of 26 had become NPA. These amounted to Rs.7.63 lakh. Recovery process in these accounts is currently underway. The official was placed under suspension in May, 2017

(c): The measures taken by Government and Reserve Bank of India (RBI) to control and prevent frauds in banks, inter-alia, include reiteration of instructions to banks on framework for  timely  detection,  reporting,  investigation,  etc.  relating  to  large  value bank frauds  for  strict  compliance,  focus  on  early  detection  of  loan  frauds,  prompt reporting  to  RBI  and  investigative  agencies,  timely  initiation  of  staff  accountability proceedings,  advise  to  banks  to  classify  potential  fraud  accounts  as  Red  Flagged Accounts (RFA) based on observation/evaluation of Early Warning Signals (EWS), operationalization of Central Fraud Registry (CFR) to support exercise of due diligence during  credit  sanctioning  process,  imposing  penalty  on  banks  for  laxity  in  internal controls including issue of 'Letter of Warning' for lapses in following the procedures / guidelines / reporting, rotational transfer of staff in sensitive positions to be covered in internal audit, mandating banks to implement measures for strengthening the SWIFT operating environment in banks etc.