Banks reports at least 33.5-bln-rupee fraud accounts to RBI Oct-Dec

Monday, Jan 11, 2021


By Alekh Archana and Ajay Ramanathan

MUMBAI – Banks have tagged loan accounts with dues of at least 33.5 bln rupees as fraud to the Reserve Bank of India in Oct-Dec, a figure that is seen increasing as more lenders make similar disclosures following the central bank's diktat. 


The data, reported by Cogencis as per disclosure to the exchanges, is spread across just eight non-performing accounts such as two companies of Pratibha Group, IL&FS Financial Services, Sintex Industries, SEL Manufacturing of four banks – Punjab & Sind Bank, Indian Bank, Karnataka Bank, and Punjab National Bank. 


While Il&FS Financial Services along with its group companies are being resolved through the National Company Law Tribunal, SEL Manufacturing was referred for bankruptcy proceedings in October 2017. 


In case of Sintex Industries, Delhi High Court has directed both Punjab National Bank and Axis Bank to maintain status quo with respect to declaring its accounts with the banks as fraud until the next hearing.


In October, the company filed a writ petition in Delhi High Court challenging the RBI order on classification and reporting of fraud by banks and select financial institutions under which Punjab National Bank and Axis Bank had declared its accounts as fraud. 

On Dec 16, Cogencis reported that the RBI had identified a set of large red-flagged loan accounts and set a hard deadline of Dec 31 for banks to report if such accounts classify as "fraud".

The central bank was prompted to do so after noticing significant delay in reporting, even in cases where a particular loan account had exposure across banks. 

For instance, Punjab & Sind Bank reported its exposure to IL&FS Financial Services as fraud to the RBI, as per a disclosure to exchanges on Oct 23. The same account was reported by Indian Bank only in December. 


The RBI's annual report for 2019-20 (Jul-Jun) had said the average lag between the date of occurrence of frauds and their

detection by banks and financial lenders was 24 months during the previous financial year. In case of large frauds of 1 bln rupees and above, the average lag was as much as 63 months.


This, analysts said, explained why lenders had detected fraud in companies after they were referred for resolution under the Insolvency and Bankruptcy Code. 


Last month, the administrator in charge of Dewan Housing Finance Corp, which was referred for insolvence proceedings in November 2019, had said Grant Thornton India LLP found fresh fraudulent transactions worth 10.6 bln rupees.


Analysts said reporting of the fraud amount to the RBI was also subject to the outcome of court orders in various cases and detection of fraudulent activities such as diversion of funds by investigative agencies. 


In certain cases, the Central Bureau of Investigation had conducted raid on premises of various defaulters following complaints of alleged bank fraud.  


According to reports, Delhi High Court has asked State Bank of India to maintain 'status quo' on accounts of Anil Ambani's Reliance Communication, Reliance Telecom, and Reliance Infratel, declared as fraud by the bank. 


Based on the figures certified by the resolution professional for Reliance Communication, the three group companies owe 260 bln rupees to banks and financial institutions, Press Trust of India reported on Dec 30. 


"The alleged 'fraud' classification by certain banks is entirely unjustified and unwarranted, and the Hon'ble Delhi High Court by an interim order has directed the same to be kept in abeyance for the time being, and the matter is now sub judice," the report quoted Reliance Communications as saying.  End


Edited by Subham Mitra


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