Millionaires cheating public-sector banks and escaping away from India with their huge loot is a citation on the inability of our banking institutions to do their job. Institutions tasked with monitoring and regulating banks, and checking out for the criminal activities, especially in the financial sector, were caught out most recently when businessman Nirav Modi and his uncle Mehul choksi allegedly defrauded the Punjab National Bank (PNB) of almost Rs 12,000 crore within a span of 7 years.
With these shameful incidents happening frequently in India, the Centre will reportedly table a bill against such frauds and fugitive offenders. Reports indicate that the bill will have provisions that will direct authorities to confiscate the assets of those leaving for foreign shores evading prosecution or refusing to return, reported the Economic Times. The bill is in the public domain for feedback.
As per the draft law put out by the law ministry, a fugitive economic offender refers to “any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India,” and “leaves or has left India so as to avoid criminal prosecution; or refuses to return to India to face criminal prosecution.”
Certain reports indicate that the Centre is likely to table the bill in the second half of the Budget session, which is slated to begin from March 6.
What Banks May Do?
- All Banks will review their systems including IT, ethical banking procedures. Disclosures to RBI, SEBI and other regulators should be made with consistent periodicity.
- SWIFT-CBS linking must be made mandatory for all LoUs. Confirmation from lending foreign branches must be done for each of the LoUs.
- All Audits must be completed within given time and should be shared with RBI. In the PNB case, the bank has reported the finance ministry that the last audit was done in March 2009.
- Training of Bank staff including skills upgrade, techniques to prevent fraud.
Both RBI and Financial Unit of Govt. of India will be tasked with closely monitoring transactions of all Banks.