GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF FINANCIAL SERVICES 

RAJYA SABHA
UNSTARRED QUESTION NO. 2398
ANSWERED ON THE MARCH 19, 2013 / PHALGUNA 28, 1934 (SAKA)

 QUESTION
Fraud Cases in Public Sector Banks 

2398: SHRI RAJEEV CHANDRASEKHAR: 

Will the Minister of FINANCE be pleased to state:

(a)   whether fraud cases in public sector banks have increased manifold in the recent past;

(b)   whether these banks are funding high risk ventures without taking adequate precautions, and also breaching RBI norms in extending excess loans;

(c)    if so, the details thereof for the last three years, year-wise and bank-wise with number of fraud cases reported in each bank and amount involved therein; and

(d)   the details of preventive and other measures are being taken by the banks, RBI and Government in this regard?

ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA) 

(a), (b) & (c) : The Reserve Bank of India (RBI) has informed that the incidents of frauds reported by Public Sector Banks (PSBs) with amount involved in therein for the last three financial years is as under:                                                                                                                                                      (Rs in lakhs)

The amount involved in fraud cases is showing an increasing trend. Bank wise details in this regard are furnished in Annex - I.

Banks follow instructions laid down by RBI. In case of any deviation, appropriate action is taken as per rules.

 (d) RBI as a part of its supervisory process also takes the following measures to prevent/reduce the incidence of frauds:

(i)     Sensitizes banks from time to time about common fraud prone areas through issuance of modus operandi circulars on various types of frauds and the measures to be taken by them.

(ii)   Issues caution advices in respect of borrowers who have defrauded the banks.

In the past considering various concerns arising out of bank's operations, including incidence of frauds, RBI has advised banks to:

(a)   Introduce a system of concurrent audit;

(b)   Review working of internal inspection and audit machinery in banks by the Audit Committee of the Board of Directors;

(c)    Constitute a Special Committee of the Board to exclusively monitor frauds of Rs 1 crore and above.

(d)   In order to make third parties and professionals accountable, who have played a vital role in credit sanction/disbursement or facilitated the perpetration of frauds, banks have been advised vide circular dated March 16, 2009 to report to Indian Bank's Association (IBA). IBA in turn will prepare caution lists of such parties for circulation among the banks.