Lok Sabha Question No. 2302 (UNSTARRED), answered on 2016-03-11
Subject: Bank Scam
Ministry: FINANCE
Asked by: NANDI YELLAIAH

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

LOK SABHA UNSTARRED QUESTION NO 2302

TO BE ANSWERED ON THE 11 th  MARCH, 2016 / PHALGUNA 21, 1937 (SAKA)

## BANK SCAM

## 2302 . SHRI NANDI YELLAIAH:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  Government  has  received  any  complaint  against  banks siphoning  off money,  if  so,  the  details  thereof,  State  and  bank-wise  including  State  Bank  of Hyderabad;
- (b) whether  the  Government  has  conducted  an  inquiry  in  this  regard,  if  so,  the  details thereof; and
- (c) the steps taken/being taken by the Government to check such irregularities in future?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI JAYANT SINHA)

(a) & (b): Reserve Bank of India (RBI) has informed that a case was handled on fixed deposit related fraud in 2014 / 2015.   After following due procedure in this case, monetary penalties have been imposed on the following three banks for violation of RBI instructions, inter-alia,  on  Know  Your  Customer  (KYC)  /  Anti  Money  Laundering  (AML).  The  details  of penalty are:

|   S. No. | Name of Bank              |   Penalty Amount (Rs. in crores) |
|----------|---------------------------|----------------------------------|
|        1 | Bank of Maharashtra       |                              1.5 |
|        2 | Dena Bank                 |                              1.5 |
|        3 | Oriental Bank of Commerce |                              1.5 |

Eight  other  banks,  namely  Central  Bank  of  India,  Bank  of  India,  Punjab  and  Sind  Bank, Punjab National Bank, State Bank of Bikaner and Jaipur, UCO Bank, Union Bank of India and Vijaya Bank have been cautioned to put in place appropriate measures and review them from time to time to ensure strict compliance of KYC requirements in future.

(c): RBI has issued Master Circular on 'Frauds - Classification and reporting' vide RBI. DBS.CFMC.BC.No.1  /  23.04.001/2015  -16  dated  July  01,  2015 containing all the details/aspects  relating  to  frauds.  On  receipt  of  fraud  reports  from  banks,  various  aspects related to the frauds are examined and concerned banks are advised to report the case to CBI/  Police/  SFIO,  examine  staff  accountability,  complete  proceedings  against  the  erring staff expeditiously, take steps to recover the amount involved in the fraud, claim insurance wherever applicable  and  streamline  the  system  as  also  procedures  so  that  frauds  do  not recur. To compress the time taken in detection of fraud, a new framework for handling loan frauds  has  been  put  in  place.  The  framework  stipulates  continuous  monitoring  of  loan accounts,  time  bound  action  at  each  stage  of  loan's  life  cycle  and  commencement  of investigation on observing early warning signal in an account. Further the framework also prohibits  banks  from  extending  bank  finance  to  borrowers  who  have  defaulted  and  also committed a fraud for five years from the date of full payment of the defrauded amount.

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