NEW DELHI: Stung by a spate of banking frauds, the finance ministry on Tuesday asked public sector banks (PSBs) to probe all NPA accounts of over Rs 50 crore for possible fraud and accordingly report them to the CBI.
They have also been asked to come up with "pre-emptive" action plan within a fortnight to combat rising operational and technical risks, and assign clear accountability to senior functionaries.
These directions come amid Punjab National Bank reporting Rs 12,700 crore fraud through the misuse of letters of undertaking (LoUs) allegedly by billionaire jeweller Nirav Modi and associates. Besides, other frauds involving jewellers and other companies too have surfaced in quick succession recently, spurring the ministry into action.
Financial Services Secretary Rajiv Kumar, through a tweet informed that managing directors of PSBs have been directed to detect bank frauds and refer the cases to the CBI.
"PSB MDs directed to detect bank frauds & consequential wilful default in time & refer cases to CBI. To examine all NPA accounts > Rs 50Cr for possible fraud," the secretary said in the tweet.
PSBs have also been asked to involve Enforcement Directorate (ED)/ Directorate of Revenue Intelligence (DRI) for violations of PMLA, FEMA or Export-Import norms.
Kumar further said that the chief vigilance officer of the bank concerned will have to vet complaints and coordinate with CBI for frauds exceeding Rs 50 crore.
Also, banks will have to seek borrower status report from Central Economic Intelligence Bureau (CEIB) on the account turning to a non-performing asset (NPA) or bad loan and CEIB will have to revert in a week.
Banks have to involve ED/DRI if conditions warrant, under the framework for timely detection, reporting and investigation of large value bank frauds.
In this context, a senior official pointed out that the mere fact of referring NPA to National Company Law Tribunal (NCLT) will not absolve either the banks or the promoters and companies of wrong doings.
The 12 large NPA accounts referred to NCLT at the behest of Reserve Bank of India have outstanding loans of Rs 1.75 lakh crore.
In the second list, RBI identified 29 large NPA accounts and asked banks to resolve them under the Insolvency and Bankruptcy Code (IBC).
In another directive, the finance ministry asked PSBs to come out with "pre-emptive" action plan to combat rising operational and technical risks, and assign clear accountability to senior functionaries.
Executive Directors and chief technology officers (CTOs) of PSBs have been asked to prepare a blueprint to enhance preparedness for combating increasing risks, Kumar said in another tweet.
"15 days deadline for PSBs to take pre-emptive action and identify gaps/weakness to gear up for rising Ops and Tech risks; To learn from best practices and pinpoint strategies including tech solutions; clear accountability of senior functionaries," he said.
The PSBs will have to come out with comparative assessment of their banks' operational risk management practices with best practices and "identify gaps and areas for improvement", he said.
The EDs and CTOs, he added, will have to prepare reports based on best practices and minimum acceptable standards and suggest action points including technological solutions.
The Boards of banks have been asked to assign clear accountability to senior functionaries for implementation and compliance of the report.
The 15-day deadline to PSBs comes as part of government's ambitious reform agenda, under the rubric of an Enhanced Access and Service Excellence (EASE) programme.
Indian Banks' Association (IBA) would soon be convening a meeting of the of banks to prepare an action plan, sources said, adding that the large lenders would be asked to handhold smaller banks to making the system foolproof.
The banks, the officials further said, would be required to implement the suggested changed within a time frame after taking necessary approval from their respective boards.