Lok Sabha Question No. 1918 (UNSTARRED), answered on 2023-03-13
Subject: Bank Frauds
Ministry: FINANCE
Asked by: Maddila  Gurumoorthy, Goddeti Madhavi

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-1918

ANSWERED ON- 13/03/2023

## BANK FRAUDS

## 1918. SHRI MADDILA GURUMOORTHY SHRIMATI GODDETI MADHAVI

Will the Minister of FINANCE be pleased to state:-

(a) whether it is true that public sector banks have seen eighty cases of fraud of over Rs. 100 crore in FY 2021-22 alone;

(b) if so, the details thereof and the reasons therefor;

(c) whether the Government is taking any concrete steps to tackle the problem of fraud in public sector banks; and

(d) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

(a) to (d): As per Reserve Bank of India (RBI), the number of frauds above Rs. 100 crore in  Public  Sector  Banks  (PSBs)  is  79  for  the  Financial  Year  2021-22  and  details  are  at Annex. The major reasons for such frauds, as informed by the PSBs, includes, inter-alia diversion/siphoning of the funds, misrepresentation/manipulation of books of account and submission of false financial statements by borrowers, non-compliance of laid down standard operating procedure  or regulatory guidelines in respect of deposit/loan accounts, collusion between the borrowers and third-party agencies, e.g. valuers, advocates, chartered accountants, etc.

Comprehensive steps have been taken to keep a check on the banking frauds and deter fraudsters, which includes, inter alia, the following -

- (i) An online searchable database of frauds reported by banks, in the form of Central Fraud Registry, has been set up by RBI to enable timely identification, control and mitigation  of  fraud  risk  and  also  to  carry  out  due  diligence  during  the  credit sanction process.
- (ii) RBI  has  issued  Master  Directions  on  Frauds,  which  requires  banks  to  report frauds  to  law  enforcement  agencies  (LEAs), viz State  Police,  Central  Bureau  of Investigation (CBI), etc . for further investigation and appropriate actions. Further, it  also  requires  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  reviews  cover, inter  alia, preventive

measures, fraud detection systems, systemic lacunae, remedial action, monitoring of progress of investigation and recovery, and staff accountability.

- (iii) To  cover  all  fraud  cases  involving  amount  of  Rs.  3  crore  and  above  and  to examine  the  role  of all  levels  of  officials/Whole  Time  Directors  (WTDs) (including  ex-officials/ex-WTDs)  in  PSBs,  the  extent  and  scope  of  the  existing Advisory Board for  Banking  and  Financial  Frauds  (ABBFF)  was  revised  by  the Central Vigilance Commission in consultation with RBI and the Government.
- (iv) Institution of comprehensive, automated Early Warning Systems (EWS) in PSBs, with  ~80  EWS  triggers  and  use  of  third-party  data  for  time-bound  remedial actions.
- (v) For management of fraud risk, early detection of loan frauds, prompt reporting to RBI  and  investigative  agencies,  and timely initiation of staff accountability proceedings,  RBI  has  issued  a  framework  for  dealing  with  loan  frauds  and  red flagged  accounts  (RFA),  requiring  banks  to  classify  potential  fraud  accounts  as RFAs based on observation or evaluation of early warning signals noticed.
- (vi) RBI  has  instructed  banks  to  report  deficient  third-party  services  (such  as  legal search  reports,  property  valuers'  reports,  etc.)  and  collusion  of  these  service providers  with  fraudsters  to  the  Indian  Banks'  Association,  which  maintains  a caution list of such service providers.
- (vii) Heads of PSBs have been empowered to issue requests for issuance of Look-Out Circulars.
- (viii) PSBs  have  been  advised  to  obtain  certified copy  of  the passport of the promoters/directors and other authorised signatories of companies availing loan facilities of more than Rs. 50 crore.
- (ix) Wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and their unit is debarred from floating new ventures for five years.
- (x) Wilful  defaulters  and  companies  with  wilful  defaulters  as  promoters/directors have been debarred from accessing capital markets to raise funds.
- (xi) The  Fugitive  Economic  Offenders  Act,  2018  has  been  enacted  to  provide  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.

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## Lok Sabha Unstarred question no. 1918, regarding Bank Frauds

## Details of Frauds in Public sector banks during the financial year 2021-22 in respect of amount involved over Rs. 100 crore and above in each fraud

Amounts in crore Rs.

| Bank                  | FY 2021-22   | FY 2021-22                |
|-----------------------|--------------|---------------------------|
|                       | Number       | Aggregate Amount involved |
| Bank of Baroda        | 9            | 2,860.85                  |
| Bank of India         | 15           | 4,668.00                  |
| Bank of Maharashtra   | 2            | 896.30                    |
| Canara Bank           | 6            | 2,774.26                  |
| Central Bank of India | 3            | 388.24                    |
| Indian Bank           | 7            | 1,628.36                  |
| Indian Overseas Bank  | 3            | 874.76                    |
| Punjab And Sind Bank  | 2            | 364.03                    |
| Punjab National Bank  | 13           | 7,111.52                  |
| State Bank of India   | 12           | 4,856.71                  |
| UCO Bank              | 1            | 374.96                    |
| Union Bank of India   | 6            | 1,999.31                  |

Source: RBI

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