CVC constitutes Advisory Board for Banking Frauds

The Central Vigilance Commission (CVC) has constituted Advisory Board for Banking Frauds (ABBF) to examine bank fraud over Rs 50 crore and recommend action. It is reconstituted and rejigged version of erstwhile Advisory Board on Bank, Commercial and Financial Frauds.

About Advisory Board for Banking Frauds (ABBF)

Composition: Former Vigilance Commissioner T M Bhasin will be Chairman of this four member body. Its members include Madhusudan Prasad (former Urban Development Secretary), D K Pathak (former Director General of Border Security Force) and Suresh N Patel (former MD and CEO of Andhra Bank). The tenure of Chairman and members will be for period of two years from August 21, 2019.

Genesis: It has been established by CVC in consultation with the Reserve Bank of India (RBI) based on consultation (recommendation) of YM Malegam Expert committee on Non-Performing Assets (NPAs) and frauds constituted by RBI.

Functions: It will conduct first level of examination in all major fraud cases before recommendations or references are made to investigative agencies such as Central Board of Investigation (CBI) by the respective public sector banks (PSBs). Individual PSBs will refer all large fraud cases above Rs, 50 crore to ABBF and on receipt of recommendation from it, the concerned bank will take further action. It will also periodically carry out frauds analysis in financial system and give inputs for policy formulation related to the fraud to the RBI.

Jurisdiction: It will be confined to cases involving officers of General Manager cadre and above in respect of allegation of fraud in lending case.

HQ and Services: It will be headquartered in Delhi. RBI will provide required secretarial services, analytical and logistic support along with the necessary funding to the board.

Background

Central Government already has issued ‘framework for timely detection, reporting, and investigation relating to large-value bank frauds’ to PSBs in a bid to check incidences of bank fraud. This framework makes it clear that all accounts exceeding Rs. 50 crore, if classified as NPA, should be examined by banks from angle of possible fraud, and report be placed before bank’s Committee for Review of NPAs based on findings of the investigation. Examination of wilful default will be initiated immediately upon reporting fraud to the RBI. Moreover, report on borrower will be sought from Central Economic Intelligence Bureau in case account turns NPA.

Note: NPAs and frauds are considered consequence of each other, but they are different. The distinction between NPA and bank fraud is that fraud is a criminal offence, an NPA is a loan or advance wherein interest or instalments of principal remain overdue for over 90 days.

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