New Delhi: In a move that will aid investigation agencies in their probes against bank frauds, the Central Vigilance Commission (CVC) on Tuesday shared its analysis report on the top 100 banking frauds in the country with the Reserve Bank of India (RBI), the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI).

Vigilance commissioner T.M Bhasin said that the report focused on “the modus operandi, amount involved, type of lending (consortium or individual), anomalies observed, loopholes that facilitated the perpetration of the fraud concerned and the systemic improvements required to plug the gaps in the system and procedures".

“The measures suggested include strengthening of standard operating procedures (SOPs) and the monitoring system, and also highlighting the role of controlling offices, so as to examine the aspect of quality of business," Bhasin said.

The CVC analysed 13 areas— gems and jewellery, manufacturing and industry, agro, media, aviation, service and project, discounting of cheques, trading, information technology, export business, fixed deposits, demand loans, and letters of comfort.

The modus operandi of the top 100 loans was then analysed and loopholes or lapses were identified.

With jewellers Nirav Modi and Mehul Choksi at the centre of the 14,356 crore Punjab National Bank (PNB) fraud, the CVC report stated, “The companies acted cleverly to avail entire pre-shipment as Standby Letter of credit instead of packing credit loans, for which consortium succumbed to their innovative funding ideas. The companies also resorted to availing post-shipment finance by discounting ‘export bills’ from one of the member banks, while pre-shipment finance was obtained from another member bank by way of SBLC (standby letters of credit), leading to double financing."

In case of bank frauds in the jewellery sector, the CVC also pointed out that banks needed to exercise due diligence on the buyers and “have executed a tripartite agreement with the buyers and exporters to remit proceeds to bank account of the companies in India. Confidential Report (CR) on all foreign buyers should have been obtained or analysed".

Giving details of frauds in the gems and jewellery sector, the report cited different modus operandi by private companies, including inflating the valuation of diamonds with the intention to avail higher credit facilities from lenders. It said the absence of effective mechanism in banks and certain other loopholes led to frauds in this sector and suggested systemic changes.

“The gem and jewellery sector credit facilities to these companies increased manifold within a short span of time in an effort by the banks to increase their credit dispensation. There should have been some segment related limits on such type of credit exposures," said the report.

With Vijay Mallya’s grounded Kingfisher Airlines a leading subject of bank fraud probes, the commission also analysed frauds carried out in the aviation sector.

Without naming Kingfisher, the CVC report said, “The Company willfully cheated the banks with an intention to siphon off funds. The money apparently was diverted to several shell companies in seven countries."

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