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CBI wants banks’ nod to probe execs in fraud cases Move Follows Plaints To Fin Ministry Over Alleged Harassment

August 15, 2019 08:57 AM


CBI wants banks’ nod to probe execs in fraud cases
Move Follows Plaints To Fin Ministry Over Alleged Harassment


The Central Bureau of Investigation (CBI) has asked banks filing complaints against borrowers to also authorise the agency to investigate current and former employees. This follows complaints by banks to the finance ministry that they are being harassed by enforcement authorities.

The stress in the corporate sector has exposed shortcomings in the loan-sanctioning process. In many cases, government agencies have taken up investigation of wilful default cases.

The Reserve Bank of India (RBI) has also pulled up banks for not reporting as frauds the cases that are being investigated by the government agencies.

Last month, when a public sector bank lodged a complaint with the CBI in respect of a corporate borrower, the agency also asked the bank to provide an authorisation to investigate employees associated with the account. Banks are now in a dilemma over this. On the one hand, they have been complaining about action by the investigative agencies affecting their work.

At the same time, they need the support from such agencies to follow the money trail, particularly in those cases where their forensic audit shows there has been a diversion of funds. Lenders plan to take up this issue with the Indian Banks Association to ensure that the focus of the investigations does not shift to procedures and commercial decisions.

PSU bankers say that reviewing commercial decisions that have gone wrong in hindsight would make it difficult for them to take a call. Before a decision is taken, there are always counter opinions and risk factors that are highlighted by the risk management team. These are usually used against the bankers in the cases of loans that get classified as wilful defaults.

In an interview last month, SBI chairman Rajnish Kumar had said that investigative agencies and banks are on the same side, but there is some sort of disconnect. Calling for more cooperation between lenders and investigative agencies, he said that there was a need to weed out corruption and irregularities.

“But when it comes to procedures or commercial decisions going wrong, then there has to be an understanding about the category under which such a case is treated,” said Kumar.

The SBI chairman had also raised the issue of over 200 bankers being named by an investigative agency in a corporate loan default case. “I do not see a situation that 250 bank officers from different lending institutions colluded together to help one person divert funds,” said Kumar

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