The Finance Ministry has reportedly asked chief executives of public sector banks (PSBs) to check all NPA accounts exceeding £5 million for fraud or they could face criminal conspiracy charges. The news came in light following the arrest of Bhushan Steel promoter Neeraj Singhal by the Serious Fraud Investigation Office (SFIO) for allegedly siphoning off funds. Sources said that bankers could be held accountable under Section 120B of Indian Penal Code if they fail to report fraud in an account which is later unearthed by investigating agencies.
They added that if the investigating agencies find diversion of funds in those defaulting accounts, bankers may be liable to face criminal proceedings, and that this advisory is like an extra precaution to keep bankers from getting legal tangles. Over a dozen companies undergoing bankruptcy resolution are being reviewed by banks and investigating agencies for fraudulent activities including diversion of funds.
Indian banks currently face mounting non-performing assets (NPAs) or bad loans, especially at PSBs, which have reached over £80 billion. Several banking frauds have also been unearthed, including the £1.40 billion scam at PNB. A senior government official confirmed the development and said that some discrepancies have been pointed out in the case of a steel maker and a real estate firm among 10-12 companies. He said, “There were some inputs and lenders who have been asked to provide transaction details of last five years. If required, banks will also undertake forensic unit.”
The SFIO arrested Singal earlier this month for alleged diversion of £200 million raised through loans from state-owned banks. Another government official said, “Similar modus operandi has been used by other promoters also.” He added that there have been intelligence inputs on associate companies being used for similar transactions. The source said that SFIO is also looking into the books of companies that are currently undergoing debt resolution, and this has been done on the basis of specific inputs provided by the ministry of corporate affairs.
The Reserve Bank of India (RBI) had identified 12 stressed accounts on June 2017, each having more than £500 million of outstanding loans and accounting for 25 per cent of toal non-performing assets (NPAs) of banks for immediate referral under the Insolvency and Bankruptcy Code (IBC). In August, RBI had sent a list of 28 more firms to lenders for resolution by December 2017.
