Multi-agency cell on cards to curb bank fraud

Monitoring authority to work with RBI

The proposed EMC will be under the jurisdiction of the Finance Ministry’s banking division.
It  will work in tandem with the fraud monitoring cell (FMC) of the Reserve Bank of India (RBI) to prevent incidence of financial fraud, highly placed sources in the Finance Ministry told Deccan Herald.

“The details regarding the proposed EMC are being worked out. Once the mechanism for its operation is ready, it will be put before the government for approval,” sources said.
The proposed EMC will have officials specialised in detecting financial fraud.

They would be drawn from the Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Serious Fraud Investigation Office and the Economic Intelligence Wing of the Finance Ministry.

The EMC will provide inputs to the RBI to further strengthen its supervisory powers to prevent frauds, sources said.

Cause for concern

As per the latest data, the total number of cases of fraud as reported by commercial banks, urban co-operative banks and non-banking financial institutions to the RBI stands at 22,540 in 2008. The total amount involved in fraud is Rs 1,480.14 crore.

In 2006, the total number of cases reported to the RBI stood at 21,812, and the amount involved was Rs 1,254.05 crore.

In 2007, as many as 22,884 cases of fraud involving Rs 1,141.26 crore were reported.
The RBI’s fraud monitoring cell has reported that unscrupulous customers, third party outsiders and even staff members perpetuate fraud.

Fraudulent discount

A detailed investigation by the FMC revealed that in borrowal accounts, some firms were found to have used methods such as fraudulent discount or instruments, fraudulent removal of pledged stocks, disposal of hypothecated goods without the knowledge of the banks and diversion of funds outside borrowing units.

Certain borrowers were also found to have availed credit facilities under multiple banking arrangements by submitting fake documents, the FMC reported.

In addition, third parties such as builders, warehouse and cold storage owners, motor vehicle and tractor dealers, travel agents and professionals such as architects, valuers, chartered accountants and advocates were also found to have helped either directly or indirectly in the perpetration of fraud, the probe revealed.

Checklist

* Monitoring cell comes under Finance Ministry
* Officials to be drawn from CBI, SFIO
* RBI’s supervisory powers to be strengthened
*Cases of fraud in 2008 stands at 22,540