Govt asks PSBs to report NPAs over Rs 50 crore for possible fraud; gives 15-day deadline to take action

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The Finance Ministry has directed managing directors (MDs) of public sector banks (PSBs) to examine all non-performing assets (NPAs) or bad loans over Rs 50 crore for possible fraud and refer the same to the Central Bureau of Investigation (CBI).

The banks have been given 15 days to take preemptive action and identify and address operational and technological risks.

In a tweet, Rajeev Kumar, Secretary at the Department of Financial Services, Ministry of Finance said, “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.  Involve ED/DRI for PMLA/FEMA/EXIM violations, if any. #EASE #NewIndia @FinMinIndia @PMOIndia @PIB_India.”

In another tweet he said, “15 day deadline for PSBs to take pre-emptive action & identify gaps/Weaknesses to gear up for rising Ops & Tech risks; To learn from best practices & pinpoint strategies including tech solutions; Clear accountability of senior functionaries. #EASE @PMOIndia @FinMinIndia @PIB_India”

The government has issued a diktat to executive directors and chief technology officers to identify weaknesses, do comparative assessment of the best practices and make a blueprint to enhance preparedness for rising operational and technological risk challenges.

The move comes in the wake of the Rs 12,700 crore scam at Punjab National Bank.

As clear failures were found in PNB's systems and processes, the spotlight has now shifted to the senior management of PSBs and as their owners, the government has informed that the Board must assign clear accountability to senior management for implementation and compliance of the all processes.

On February 14, PNB informed the stock exchanges of a scam worth Rs 11,400 crore (USD 1.7 billion) in which two of its employees connived and fraudulently issued multiple Letters of Undertaking (LOUs) to high profile diamond and jeweller Nirav Modi’s three firms and Mehul Chokshi’s Gitanjali Group firms.

This, the bank said in a late night filing on Monday, had scaled up by another Rs 1,330 crore.

Several other Indian banks with foreign branches have given loans against the LoUs and have been impacted by the scam.