Bank frauds, NPAs rising: CBI

By Vinay Kumar

NEW DELHI, JUNE 29. As the economy continues on the path of liberalisation and with it the banking sector expands, the law enforcing agencies appear concerned over the rising graph of bank frauds in the country involving mind boggling amounts of public money.

Another crucial area of concern is the upward rise of the Non- Performing Assets (NPAs) of banks which have increased in the wake of expansion of credit facilities.

The quantum of NPAs as a percentage of advances is one of the critical indicators of the quality of a bank's loan portfolio as well as its overall health.

According to the Reserve Bank of India (RBI) report on trend and progress of banking in India 1996-97, the net NPAs increased from Rs. 12,935 crores in 1995-96 to Rs. 13,902 crores in 1996-97 in the nationalised banks.

A report presented by the then Special Director of the CBI, Mr. P.C. Sharma, recently to the High-Powered Committee on Legal Aspects of Bank Frauds, has expressed concern at the steady increase in the number of type of bank frauds in recent years.

A very small percentage of the NPA cases are either referred to the local police or the CBI for investigation.

The latest scam to rock the banking sector was the Rs. 131-crore payorder scam involving the Madhavpura Mercantile Cooperative Bank and high-profile Mumbai stock broker, Ketan Parekh.

In an extraordinary move, the Government pumped in Rs. 800 crores as part of the revival package for the Madhavpura Cooperative Bank last week. If the 1992 securities scam, involving Harshad Mehta, was an eye opener on the magnitude of frauds in bank and financial institutions, frauds in the Indian Bank and other public sector banks involving crores of rupees of public money were no less disturbing feature for the banking sector.

Most of the cases registered for investigation are referred to the CBI by the respective banks and a very small number of cases are taken up suo motu for investigation by the agency.

There is a growing hesitancy among the banking community in taking commercial decisions allegedly due to the fear of investigation or enquiry either by the CBI or Central Vigilance Commission even in cases where there is no mala fide on the part of the bank officials but the commercial decisions boomerang because of external factors.

Bank officials fear that vigilance and investigative agencies often take such genuine defaults as contributory to the criminal design of the decision- making authorities.

The CBI report said scheduled commercial banks had 65,485 branches in the country in 1997 apart from the 180 branches of 41 foreign banks in India.

The total loans and advances of these banks stood at Rs. 2,76,530 crores as on June 30, 1997. As per the RBI report, Rs. 13,902 crores have been classified as net ``NPA'' in the nationalised banks. Thus, the percentage of net NPA to the total advances is nearly 10 per cent. An analysis of the fraud cases, undertaken by the CBI, indicated that frauds perpetrated on the banks could be classified broadly into nine categories. These include misappropriation of cash tendered by the banks' constituents and misappropriation of cash in remittance, withdrawal from deposit accounts through forged documents, opening of account in fictitious name, misappropriation through manipulation of books of accounts and through clearing transactions, overstepping of lending discretionary powers, issue of letter of credit, bank guarantees and acceptance of bills without proper authority, frauds in foreign exchange transactions by flouting exchange control manual provisions, and frauds in computerised environments.

Send this article to Friends by E-Mail

Section  : Front Page
Previous : Maran against new trade round at WTO
Next     : Mass conversion in T.N. village