Vigilance Commission’s TM Bhasin On Loopholes That Lead To Banking Frauds

Banks and related authorities need enhanced use of technologies and ground-level checks to combat fraud in the industry, said the Vigilance Commissioner of India TM Bhasin.

“We’ve found that systems and procedures that have been prescribed by the banks and the RBI, in many number of cases, haven’t been followed by the field-level functionaries,” Bhasin told BloombergQuint. Banks need to follow up on these manufacturing facilities and their suppliers after disbursement of loans through field checks, he said.

“Bankers have to be more vigilant about the buyers of the companies because in some cases we’ve found that the buyers are shell companies floated by drivers or lowly paid employees,” he said.

Another reason for frauds in case of consortium lending was the lack of due diligence where the smaller members have simply fallen in line with the leader, he said.

These suggestions were part of a report circulated by the Central Vigilance Commission which analysed the top 100 bank frauds since April 2017 to narrow down on reasons for fraud and ways to prevent them. Over 23,000 cases of fraud involving a whopping Rs 1 lakh crore have been reported over the last five years, according to data released by the Reserve Bank of India.

The frequency has increased over the these years with over 5,000 frauds reported in 2016-17 alone, the central bank’s data showed.

Watch the full conversation here: