Finance Ministry asks PSU bank CEOs to check frauds in NPAs or face penal action

• In a stern warning to bankers, the Finance Ministry has asked chief executive of public sector banks to check all NPA accounts exceeding Rs 50 crore for fraud or they face criminal conspiracy charges.

• This missive comes in the light of arrest of Bhushan Steel’s erstwhile promoter Neeraj Singal by the Serious Fraud Investigation Office (SFIO) for allegedly siphoning off funds.

• 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.

• If the investigating agencies find diversion of funds in those defaulting accounts, bankers may be liable to face criminal proceedings, the sources said, adding that this advisory is like an extra precaution to keep bankers from getting into legal tangles.

• More than a dozen companies undergoing bankruptcy resolution are being reviewed by banks and investigating agencies for fraudulent activities including diversion of funds.

• Indian banks are facing mounting non-performing assets, especially at PSBs, which have reached over Rs 8 lakh crore. In addition, several banking frauds have been unearthed, including the Rs 14,000 crore scam at PNB, carried out allegedly by diamond jeweler Nirav Modi and his associates.

• Banks have to undertake a two-year transaction audit when they start the resolution process through IBC. In case there are any issues or specific information, banks also conduct a forensic audit.

• In August 2017, SFIO was given powers to arrest people for company law violations. SFIO is a multidisciplinary organization having experts for prosecution of white-collar crimes and frauds under the company law.

• NCLT has so far taken decision on 655 cases under IBC that include more than 200 that have been admitted to various NCLT benches.

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