A press report – RBI Data Shows India’s Bank Fraud is As High As Rs. 60,000 Crore


Reserve Bank of India (RBI) data, which a Reuters reporter obtained through a right-to-information request, shows state-run banks have reported 8,670 “loan fraud” cases totalling Rs. 612.6 billion ($9.58 billion) over the last five financial years up to March 31, 2017.

 PNB recorded 389 cases of loan fraud totalling Rs. 65.62 billion over the last five financial years

  1. Punjab National Bank claims $1.77 billion fraud by Nirav Modi
  2. An RBI report shows 8,670 cases loan fraud cases in the last 5 years
  3. The loan frauds, reported by state-run banks, total over Rs.60,000 crores
 The central bank has recorded data that shows the problem runs far deeper and wider.

Reserve Bank of India (RBI) data, which a Reuters reporter obtained through a right-to-information request, shows state-run banks have reported 8,670 “loan fraud” cases totalling Rs. 612.6 billion ($9.58 billion) over the last five financial years up to March 31, 2017.

Loan frauds typically refer to cases where the borrower intentionally tries to deceive the lending bank and does not repay the loan.

The figures expose the magnitude of the problem in a banking sector already under pressure after years of poor lending practices. Bad loans surged to a record peak of nearly $149 billion last year.

Bank loan frauds have steadily increased as well, reaching Rs. 176.34 billion in the latest financial year from Rs. 63.57 billion in 2012-13, according to the data, which doesn’t include the PNB case.

One of the leading legal experts expressed that “This might be the tip of the iceberg or the middle, and that is the worry,” and “The fact is we don’t know what else is out there.”

The Reserve Bank of India,  in its Financial Stability Report, called frauds in banks and financial institutions “one of the emerging risks to the financial sector”.

“In a number of large value frauds, serious gaps in credit underwriting standards were evident,” the RBI said, adding that some of the gaps include lack of continuous monitoring of cash flows and cash profits, diversion of funds, double financing and general credit governance issues in banks.

The RBI has been commended for forcing Indian banks to fully disclose its bad loans, speed up their recovery, and stop hiding fraud cases as non-performing assets.

Yet to some critics, the RBI has, at the same time, been too guarded about publicly sharing data on loan defaults or fraudulent loans. This is partly due to legal constraints on disclosing individual cases and worries investors would pummel the affected banks, making loan recovery even harder.

India’s biggest lender, State Bank of India reported 1,069 loan fraud cases in the last five financial years but did not disclose the amount.

The magnitude of the bad debt in India forced the government last year to bail out the sector by pledging to inject $32 billion over this financial year and next.

Yet analysts and credit rating agencies have long warned that solving the bad debt at India’s banking sector needs to also involve wholesale reforms of the lending practices that led to the surge in bad loans.

Reserve Bank cautions regarding risk of virtual currencies including Bitcoins


PRESS RELEASES

Date : Dec 05, 2017
Reserve Bank cautions regarding risk of virtual currencies including Bitcoins
Attention of members of public is drawn to the Press Release issued by the Reserve Bank of India (RBI) on December 24, 2013, cautioning users, holders and traders of Virtual Currencies (VCs) including Bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs.

Vide press release dated February 1, 2017, RBI has also clarified that it has not given any licence/authorisation to any entity/company to operate such schemes or deal with Bitcoin or any VC.

In the wake of significant spurt in the valuation of many VCs and rapid growth in Initial Coin Offerings (ICOs), RBI reiterates the concerns conveyed in the earlier press releases.

Jose J. Kattoor
Chief General Manager

Press Release: 2017-2018/1530

BITCOINS AND VIRTUAL CURRENCIES

In India, besides the RBI, the government, too, has made public its discomfort with bitcoin.

 

On Nov. 30, finance minister Arun Jaitley said India does not recognise virtual currency as legal tender. Earlier this year, a committee set up by his ministry had reportedly recommended banning cryptocurrencies over fears that they could be used to launder money and perpetuate frauds.

 

These warnings come in the wake of bitcoin’s skyrocketing value—up more than 1,000% this year. In India, its price has almost doubled in a month, from Rs4.55 lakh ($7,070) on Nov. 01 to Rs8.6 lakh on Dec.05.

 

In spite of the strong warnings, the cryptocurrency exchange operators remain unfazed.

 

The spike has led to a buying frenzy.

 

In fact, measures to curb the use of cryptocurrencies have been gaining momentum across Asia.   The central banks of Indonesia and Bangladesh have even barred the use of bitcoin as a payment tool.  In September, China shut down bitcoin exchanges and banned initial coin offerings.  On Nov. 29, the vice-president of the European Central Bank warned against investing in bitcoin at such soaring prices. The governor of the Bank of France cautioned against its potential hazards, as did Russian president Vladimir Putin and Germany’s central bank.

Meanwhile, rallying past all warning signs, bitcoin is at a record high, having crossed the $12,000 mark today (Dec. 06).

It is further said that the Government must take strong steps to stop the transactions in virtual currencies and warnings will not work in India.

Rs.17000 Crores Deposited in 58000 accounts and withdrawn post dmonetisation – investigation is on


The Ministry of Corporate Affairs has said that its investigation has found thousands of dubious banking transactions in the aftermath of note ban on November 8, 2016.

The Ministry of Corporate Affairs in a statement said that about Rs 17,000 crore was deposited in 58,000 accounts and withdrawn from the same and some of the bank accounts had a negative opening balance on November 8, 2016.

“Preliminary enquiry on the basis of information received from 56 banks in respect of 35,000 companies involving 58,000 accounts has revealed that an amount of over Rs 17,000 crore was deposited and withdrawn post demonetisation,” the statement read.

“In one case, a company which had a negative opening balance on 8th November, 2016, deposited and withdrew Rs 2,484 crore post-demonetisation,” it added.

On the basis of its investigation “around 2.24 lakh companies have been struck off till date for remaining inactive for a period of two years or more.” Following the massive drive to strike off the defaulting companies, restrictions have been imposed on operation of their bank accounts.

ACTION BY AGENCIES

These companies have been barred from “sale and transfer of moveable and immoveable properties”. The Centre has shared information about defaulting companies with the respective governments depending on the location of the firm.

Enforcement authorities including Central Board of Direct Taxes, Financial Intelligence Unit, Department of Financial Services and the Reserve Bank of India have also been advised to take further action based on the preliminary enquiry.

“The Prime Minister’s Office has constituted a Special Task Force under Joint Chairmanship of Revenue Secretary and Secretary, Corporate Affairs, to oversee the drive against such defaulting companies with the help of various enforcement agencies,” the statement issued by the Ministry of Corporate Affairs said.

“The Special Task Force has so far met five times and action has been initiated against several defaulting companies, which is expected to help in the drive against black money,” it added.

Payment systems to remain open on all days from March 25, 2017 to April 1, 2017-RESERVE BANK OF INDIA


RBI/2016-17/257
DPSS.CO.CHD.No./2695/03.01.03/2016-17

March 25, 2017

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including Regional Rural Banks/
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks/Local Area Banks

A reference is invited to the circulars DPSS.CO.CHD.No./2656/03.01.03/2016-17 dated March 23, 2017 on “Special Clearing operations on March 30 and 31, 2017” and DBR.No.Leg.BC.55/09.07.005/2016-17 dated March 24, 2017 on “All Agency Banks to remain open for public on all days from March 25, 2017 to April 1, 2017”.

2. With a view to facilitate accounting of all the Government transactions for the current financial year (2016-17) by March 31, 2017, it has been decided that all payment systems, including RTGS and NEFT would operate, as on a normal working day, during the period  March 25 to April 1, 2017 (including Saturday, Sunday and all holidays). Besides, the extended timings on March 30 & 31, 2017 for the centralised payment systems viz., RTGS & NEFT, have already been a advised to the member banks via a broadcast message.

Yours faithfully

(Nanda S. Dave)
Chief General Manager-in-Charge

Limits on Cash withdrawals from Bank accounts and ATMs – Restoration of status quo ante – RBI


RBI/2016-17/217
DCM (Plg) No. 2905/10.27.00/2016-17

January 30, 2017

The Chairman / Managing Director / Chief Executive Officer,
Public Sector Banks / Private Sector Banks / Foreign Banks,
Regional Rural Banks / Urban Co-operative Banks,
State Co-operative Banks / District Central Co-operative Banks

Dear Sir/Madam,

Limits on Cash withdrawals from Bank accounts and ATMs – Restoration of status quo ante

Please refer to our circular DCM (Plg) No.1226/10.27.00/2016-17 dated November 08, 2016 placing limits on Cash withdrawals from bank accounts and ATMs in the wake of withdrawal of Legal Tender Character of Specified Bank Notes (SBN) and subsequent circulars DCM (Plg) Nos.1256, 1274, 1317, 1437, 2142 and 2559 dated November 11, 14, 21, 28, December 30, 2016 and January 16, 2017 respectively, providing for relief and relaxations therefrom.

2. On a review of the pace of remonitisation, it has been decided to partially restore status quo ante as under:

  1. Limits placed vide the circulars cited above on cash withdrawals from Current accounts/ Cash credit accounts/ Overdraft accounts stand withdrawn with immediate effect.
  2. The limits on Savings Bank accounts will continue for the present and are under consideration for withdrawal in the near future.
  3. Limits vide the circulars cited above placed on cash withdrawals from ATMs stand withdrawn from February 01, 2017. However, banks may, at their discretion, have their own operating limits as was the case before November 8, 2016, subject to 2 (ii) above.

3. Further, banks are urged to encourage their constituents to sustain the movement towards digitisation of payments and switching over of payments from cash mode to non-cash mode.

4. Please acknowledge receipt.

Yours faithfully,

(P Vijaya Kumar)
Chief General Manager

The daily limit of withdrawal from ATMs has been increased (within the overall weekly limits specified) with effect from January 01, 2017,from the existing ₹ 2,500/- to ₹ 4,500/- per day per card. -RBI


BI/2016-17/204
DCM (Plg) No. 2142/10.27.00/2016-17

December 30, 2016

The Chairman / Managing Director/ Chief Executive Officer,
Public Sector Banks/ Private Sector Banks / Foreign Banks/
Regional Rural Banks / Urban Cooperative Banks/ State Cooperative Banks
District central Cooperative Banks

Dear Sir,

Cash withdrawal from ATMs – Enhancement of daily limits

Please refer to our circular DCM (Plg) No. 1424/10.27.00/2016-17 dated November 25, 2016 on “Withdrawal of cash from bank deposit account – Relaxation”.

2. On a review of the position, the daily limit of withdrawal from ATMs has been increased (within the overall weekly limits specified) with effect from January 01, 2017, from the existing ₹ 2500/- to ₹ 4500/- per day per card. There is no change in weekly withdrawal limits.Such disbursals should predominantly be in the denomination of ₹ 500.

3. The relaxation of withdrawal limits as enabled by our circular DCM (Plg) No. 1437/10.27.00/2016-17 dated November 28, 2016 remains unchanged.

4. Please acknowledge receipt.

Yours faithfully,

(P Vijaya Kumar)
Chief General Manager