Lok Sabha Question No. 1440 (UNSTARRED), answered on 2019-07-01
Subject: Financial Frauds in PSBS
Ministry: FINANCE
Asked by: Rebati Tripura, Manoj Kumar Tiwari, Vijay Kumar Dubey

## Government of India Ministry of Finance

## Department of Financial Services

LOK SABHA Unstarred Question No. 1440

To be answered on the 01 st  july, 2019 (Monday) / Ashadha 10, 1941 (Saka)

## Financial Frauds in PSBs

1440.   SHRI REBATI TRIPURA; SHRI MANOJ TIWARI; SHRI VIJAY KUMAR DUBEY:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has any monitoring mechanism for financial frauds in public sector banks, if so, the details thereof including the nodal agency and its officers in Delhi;
- (b) if not, the reasons therefor and how a whistleblower may approach these authorities with disclosure of their names; and
- (c) the  detailed  list  of  banks  top  officials  involved  in  financial  frauds  and  the  status  of enquiries against them in the country during the last two years, State-wise including Delhi, Uttar Pradesh and North Eastern States?

## Answer

The minister of Finance

(Smt. Nirmala Sitharaman)

(a&b) In terms of Reserve Bank of India's Master Directions on Frauds - Classification and Reporting by Commercial Banks and Select FIs dated 01.07.2016 (Updated as on 03.07.2017), Banks need to furnish Fraud Monitoring return (FMR) in individual fraud cases, irrespective of the amount involved, to RBI within three weeks from the date of detection. In addition to the FMR, banks are required to furnish a Flash Report (FR) for frauds involving amounts of Rs 50 million and above within a week of such frauds  coming  to  the  notice  of  the  bank's  head  office.  Further,  banks  are  also  required  to  furnish developments in the fraud case through the FMR Update Application.

In  January  2016,  Central  Fraud  Registry  (CFR)  has  been  operationalized  at  Reserve  Bank  of  India (RBI) as searchable online central fraud data base for use by the banks in respect of frauds above Rs.1 lakh. The CFR contains critical aspects/ information, including modus operandi in respect of frauds as reported by the banks and select Financial Institutions (FIs). This data base is helpful to the banks not only during credit decisions but also to know about fraud in various areas of   banking including cyber frauds, ATM/debit/ credit card and internet banking.

All the banks/select FIs have been given access rights through user ids and password. The CFR helps the  banks  and  FIs  in  detecting  frauds  in  their  organisation  based  on  the  frauds  reported  by  other banks/FIs  in  respect  of  any  particular  constituent  of  the  bank.  It  is  the  primary  responsibility  of  the banks/FIs to detect the fraud with or without using CFR and comply with RBI regulation with regard to classification and reporting of frauds. Government of India vide Gazette Notification No. 371/12/2002AVD- III  dated  21.04.2004  r/w  Corrigendum  dated  29.04.2004  notified  the  Public  Interest  Disclosure and Protection of Informers Resolution (PIDPI), 2004 which gave the powers to the Central Vigilance Commission  to  act  on  complaints  from  whistle-blowers.  The  PIDPI  Resolution  has,  inter-alia,  the following main provisions:

- (i)    The Commission is authorised as the Designated Agency to receive written complaints or disclosure  on  any  allegation  of  corruption  or  of  misuse  of  office  by  any  employee  of  the Central  Government  or  of  any  corporation  established  by  or  under  any  Central  Act, Government  companies,  societies  or  local  authorities  owned  or  controlled  by  the  Central Government;
- (ii) Any  public  servant  or  a  person  including  an  NGO  can  make  written  disclosure  to  the designated agency except those referred in clauses (a) to (d) of Article 33 of Constitution;
- (iii)   The Head of the Department / Organisation  to  keep  the  identity  of  informant  secret  if  he comes to know about it;
- (iv) The designated agency on finding the allegation of misuse of office or corruption substantive, shall recommend appropriate action to the concerned Department or Organisation;
- (v) If  the  informant  feels  he  is  being  victimised,  he  may  make  an  application  before  the designated agency seeking redress in the matter. The designated agency may give suitable directions to the concerned public servant or the public authority;
- (vi)   If on an application or on the basis of information gathered, the designated agency is of the opinion  that  the  complainant  or  the  witness  need  protection,  it  shall  issue  appropriate directions to the concerned Government authorities; and
- (vii)  In  the  event  of  the  identity  of  the  informant  being  disclosed  in  spite  of  the  designated agency's directions to the contrary, the designated  agency  is authorised to initiate appropriate  action  as  per  extant  regulations  against  the  person  or  agency  making  such disclosure.

Pursuant  to  the  PIDPI  Resolution,  2004,  the  Commission  vide  Office  Order  No.  33/5/2004  dated 17.05.2004 issued guidelines and Public Notice on the procedure to be followed for filing whistleblower complaints under the PIDPI Resolution, 2004.

Subsequent  to  the  Resolution  of  2004,  the  DoPT  vide  Notification  No.  371/4/2013-AVD.III  dated 14.08.2013 partially amended the PIDPI Resolution. The amendment, inter alia, authorised the Chief Vigilance Officer of the Ministries or Departments of Government of India to act as the designated Authority to receive written complaint or disclosure on any allegation of corruption or misuse of office by any employee of that Ministry or Department or of any corporation established by or under any Central Act, Government companies, societies or local authorities owned or controlled by the Central Government and falling under the jurisdiction of that Ministry or Department. The amendment also authorised the Central Vigilance Commission to supervise and monitor the complaints received by the designated authority.

(c) Bank-wise  details  of  cases  during  the  years  viz.,  2015,  2016  and  2017,  where  the  Central Vigilance Commission tendered its advice for sanction for prosecution of Public Sector Banks(PSBs) officers/officials  involved  in  corruption  cases  under  the  Prevention  of  Corruption  Act  1988,is enclosed at Annexure.

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## Annexure

Bank-wise  details  of  prosecution  sanction  cases  under  PC  Act.  1988  issued  during  2015, 2016, and 2017.

2015

| S.No   | Name of Bank              |   No. of cases |
|--------|---------------------------|----------------|
| 1.     | Canara Bank               |              1 |
| 2.     | Bank of India             |              1 |
| 3.     | State Bank of India       |              3 |
| 4.     | Indian Overseas Bank      |              1 |
| 5.     | Oriental Bank of Commerce |              1 |
| 6.     | UCO Bank                  |              1 |
| 7.     | Union Bank                |              1 |
| 8.     | United Bank of India      |              2 |
|        | Total                     |             11 |

## 2016

| S.No   | Name of Bank              |   No. of cases |
|--------|---------------------------|----------------|
| 1.     | Corporation Bank          |              2 |
| 2.     | Punjab National Bank      |              2 |
| 3.     | State Bank of India       |              1 |
| 4.     | Indian Overseas Bank      |              1 |
| 5.     | Oriental Bank of Commerce |              1 |
| 6.     | UCO Bank                  |              1 |
| 7.     | United Bank of India      |              1 |
|        | Total                     |              9 |

## 2017

| S.No   | Name of Bank          |   No. of cases |
|--------|-----------------------|----------------|
| 1.     | Central Bank of India |              2 |
| 2.     | Punjab National Bank  |              3 |
| 3.     | Bank of India         |              1 |
| 4.     | Bank of Maharashtra   |              1 |
| 5.     | Andhra Bank           |              1 |
| 6.     | United Bank of India  |              2 |
|        | Total                 |             10 |