Home >Industry >Public sector banks step up filing of cases against NPA accounts
The action against NPA accounts comes in the light of bank frauds such as those perpetrated at Punjab National Bank by Nirav Modi and at Bank of Baroda by Rotomac. Photo: Bloomberg
The action against NPA accounts comes in the light of bank frauds such as those perpetrated at Punjab National Bank by Nirav Modi and at Bank of Baroda by Rotomac. Photo: Bloomberg

Public sector banks step up filing of cases against NPA accounts

The financial services dept has asked banks to review all NPA accounts of more than Rs50 crore for fraud as it sought prompt action of cleaning up books

New Delhi: Nudged by the government to detect fraud in non-performing loan accounts (NPAs), public sector banks have filed more than 90 cases against errant companies and individuals with investigation agencies.

This comes at a time the banking system is grappling with high levels of bad debt and many instances of customers defrauding banks.

As part of the clean-up exercise to revive the health of public sector banks, the department of financial services had asked banks to review all NPA accounts of more than Rs50 crore for fraud as it looked to push banks to act promptly and stringently against fraudsters.

Banks were also directed to get copies of passports of all individuals linked to companies where loans above Rs50 crore have been given.

The diktat, considered onerous by most lenders, came after state-run banks reported rising instances of frauds where company promoters were in wilful default.

Some of the major frauds that have come to light in the last few months including the Rs14,356 crore scam that hit Punjab National Bank (PNB) involving jewellers Nirav Modi and Mehul Choksi, and the Rs3,695 crore cheating case against Rotomac Pens promoters where Bank of Baroda was the lead lender.

A senior official said the government is aiming to make bankers take responsibility for their lending decisions.

“There has to be some accountability. Bankers have to know details of all their big accounts and act when there are instances of deliberate fraud," said the senior government official who did not want to be identified. Banks have become more proactive in registering cases with investigative agencies, he added. “Bankers now know that they cannot any longer hide NPA accounts by providing fresh loans to defaulters."

For instance, in the case of nine power plants where loans have been given by public sector banks, not even boundary walls have come up, the official pointed out.

The clean-up exercise at state-run banks, led by the Reserve Bank of India (RBI) diktat of ending various loan restructuring schemes, pushed most banks to report record losses in the quarter ended March.

Fitch Ratings had in a note dated 1 June pointed out that 19 of the 21 state-run banks reported losses in FY18 and the cumulative losses were large enough to wipe out almost all of the government’s capital injections of $1.3 billion in FY18.

A senior CBI official, who did not want to be identified, said the agency has “no track of such data because the agency’s operations are spread across Delhi, Mumbai, Kolkata and Bengaluru."

To be sure, the pace of registering of first information reports by the CBI has also picked up with relation to banking sector frauds, the agency’s website shows.

Shaswati Das contributed to this story.

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