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CBI And Bank Frauds

CBI and banks continue to occupy headlines, about fraudster borrowers and their cases under investigation/prosecution.

With the portfolio of banking/corporate frauds not yet fully exposed, together with mounting NPAs in the banking system, CBI and banks continue to occupy headlines, about fraudster borrowers and their cases under investigation/prosecution. Between 2018 to 2020 alone, the CBI has registered cases involving banking frauds of over Rs. 1 lakh crores. In 2020 alone, while the pandemic was on, 200 cases involving frauds of over Rs. 70000 cr. of bank loans were registered. The CBI has taken 50 bank officials on deputation to assist it in such investigation. A couple of days ago the CBI raided 100 premises in 28 cities, in 11 states/UTs, pursuant to investigation of 30 cases of bank frauds, of Rs. 3700 cr. These raids were conducted on the basis of complaints received from banks, of cheating/siphoning/diversion and fake documents submitted by borrowers. The reports say that a huge amount of documents and incriminating evidence was found/seized during the raids conducted by the CBI. Yet another report says that the CBI has registered yet another case of cheating/fraud, against the promoters of Rotomac, on the basis of a complaint received from the Union Bank of India. The total amount involved in the scam is Rs. 3695 cr. and this case involves bogus exports, fraudulent transactions and financial statements, leading to the siphoning of money. Another recent report says that the CBI has unearthed another fraud in the case of DHFL, where fake PMAY housing loans of Rs. 11755 cr. were shown in 88651 bogus accounts and interest subsidy of Rs. 1880 cr. was fraudulently claimed from the government. PMAY loans are given to the weaker sections of society, for which the government gives interest subsidy, which was fraudulently claimed by DHFL, now under investigation.

While the CBI investigations in banking frauds have merely touched the tip of the iceberg, reports say that the government may now restrict its role as investigation/prosecuting agency, only in extraordinary bank frauds, such as where the amount involved is big, or where the borrowers have fled abroad as fugitives or where the crime is deep rooted and extensive. Thus the likes of Nirav Modi/Mehul Chokshi (loans of Rs. 13578 cr) will be investigated and so will be the likes of Vijay Mallya (Rs. 9000 cr.), Transtroy India (Rs. 7926 cr.), IVCRL (Rs. 4837 cr.), Shakti Bhog Atta (Rs. 3269 cr.), Chanda Kochher ICICI Bank (Rs. 1875 cr) and also Yes Bank – Rana Kapoor Rs. 4300 cr. The other cases may be investigated by the likes of SFIO etc.

The purpose of keeping the CBI out of most loan default cases, is to allay the fear of bankers that they will not be hounded by investigation agencies for genuine commercial decisions gone bad. The fear of a CBI action has discouraged further lending by banks, despite the PM saying that bank employees must not be penalised for genuine lending decisions gone bad and the FM asking the banks not to fear the 3Cs i.e. CBI, CVC and the CAG.

The fact of the matter is that banking frauds are serious financial crimes due to which lacs of crores of public money has been looted by dubious promoters. The fact also is that due to the prevalence of lending huge sums of money to unworthy cronies of the system and also the regular meddling in the functioning of PSBs by the netas/babus, there is utter lack of accountability in the functioning of banks, right from the giving of loans to scamsters, to their recovery, to write offs, to the fudging of financial statements by PSBs. The lack of any accountability is best symbolised by the fact that lakhs of crores of money is gone into recapitalising bankrupt banks, with no questions asked. It is all about banking crimes and accountability for public money and there is no reason why the rigours of the agencies like the CBI, CVC, CAG and Courts should be diluted to shelter delinquent bankers, and borrowers.

Instead of restricting the role of CBI in the investigation of bank frauds, the following should be done :-

  1. CBI must be well equipped with trained manpower and other tools and resources to effectively investigate such frauds.
  2. The meddling by the government into the affairs of CBI must stop.
  3. Its investigations in banking crimes must be through a multi disciplinary team and must be time bound.
  4. We must prosecute the dubious borrower and the banker too and investigate the delay of banks in referring cases to the CBI.
  5. Keep, the CBI above board. A controversial criminal investigation agency is not as effective, as it ought to be.

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