Check all NPAs above Rs 50 cr for fraud: Govt

Sanjeev Sharma

Tribune News Service

New Delhi, February 27

In a move to avoid embarrassment of bank frauds coming to fore every other day, the government today asked public sector banks to examine all non-performing assets (NPAs) of more than Rs 50 crore for fraud and set a 15-day deadline for referring such cases to enforcement agencies.

The preemptive measure comes as a handful of frauds, including Nirav Modi/Gitanjali Gems, Rotomac and Simbhaoli Sugars, have been reported in the last few days. The directive seeks to flush out fraud cases in one go rather than letting them keep appearing in drips.

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Sources, however, said banking activity, which had come to a standstill after the detection of the Punjab National Bank (PNB) fraud, was likely to be affected further and the decision could even have consequences for economic growth.

The Finance Ministry today announced a framework for timely detection, reporting and investigation of large-value bank frauds.

Rajeev Kumar, Secretary, Department of Financial Services, tweeted that the PSB MDs have been directed to detect bank frauds and consequential wilful default in time and refer cases to CBI. And to examine all NPA accounts  of more than  Rs 50 crore for possible fraud.  

The directive could open a Pandora’s box for the banking system, which is already saddled with NPAs to the tune of Rs 8.5 lakh crore given that Rs 50 crore is not a high threshold.

It will be a major exercise for banks as bad loans, or NPAs, can occur due to economic cycles and other factors. From this, wilful defaulters will have to be sifted and then the most crucial step is to examine whether it is a case of fraud, after which the matter has to be referred to the CBI. The matter has to be reported to the ED and the DRI for money laundering, foreign exchange and export import norms violation.

In another tweet, Kumar said: “15-day deadline for PSBs to take pre-emptive action and identify gaps/weaknesses to gear up for rising ops and tech risks.”