Crackdown against wilful defaulters

Tribune News Service

New Delhi, March 13

Tightening the noose around wilful defaulters, the government has asked banks to ‘name and shame’ such borrowers by publishing their photographs and other details in newspapers. The Finance Ministry has written a letter to all state-run banks directing them to take Board approvals for publication of photographs of such defaulters. Sources quoting advisory of the Finance Ministry said, “Lending institutions shall formulate a policy with the approval of their Board of directors which clearly set out the criteria for publication of photographs of wilful defaulters.” The number of wilful defaulters, who did not repay loans to PSBs despite the capacity to do so, rose to 9,063 at the end of December 2017.

The government has also issued an advisory to public sector banks to take immediate action as per the legal and regulatory framework to ensure that fraudulent activity is not prevalent in the bank.

This was stated by Shiv Pratap Shukla, Minister of State for Finance, in a written reply in the Rajya Sabha today. Banks have also been asked to ensure that robust systems and procedures are in place for confirming due approvals, necessary applications and entry in the bank’s system in respect of all letters of undertakings and SWIFT messages, and ensuring scrutiny and reconciliation of Nostro accounts, and to take all necessary steps to safeguard against occurrence of such frauds.

The government has also advised nationalised banks to collectively prepare a report for effective management of operational risks, including technology risk, so as to safeguard against occurrence of frauds. The government has also asked nationalised banks to examine all accounts exceeding Rs 50 crore, if classified as non-performing asset (NPA), from the angle of possible fraud.

In addition, the government last week directed banks to seek passport details of borrowers taking loans of Rs 50 crore and more.

“Next step in clean and responsible banking. Passport details must for loans above Rs 50 crore. Step to ensure quick response in case of fraud,” Financial Services Secretary Rajiv Kumar had said.

The RBI has also taken a number of measures to prevent and control frauds, as per the reply in Parliament.

The central bank has set up a framework for dealing with loan frauds of Rs 50 crore and above, under which banks classify potential fraud accounts as red-flagged accounts based on observation of early warning signals, and take time-bound action.

RBI has also created an online searchable database of frauds reported by banks, in the form of Central Fraud Registry, as a tool of timely identification, control and mitigation of fraud risk and for carrying out due diligence during credit sanction process.

(With PTI inputs)