Apart from assessing whether a company will be able to repay a loan, banks evaluating proposals in the corporate debt restructuring (CDR) cell will have to contend with the Central Bureau of Investigation soon. The CBI has asked chief vigilance officers (CVOs) of public sector banks (PSBs) to furnish a list of cases referred to the cell where each PSB has an exposure of Rs 100 crore and above, with an “independent analysis” on the reasons for such a reference and wrongdoings, if any.
The CBI has also suggested that bank frauds can be curbed if the CVOs participate in all cases of consortium lending in which their respective bank is a member. With banks shifting the blame to one another, it is becoming difficult to fix accountability, the investigating authority believes.
The CDR mechanism is aimed at reviving genuinely distressed companies.
Sources said the CBI is separately looking into the functioning of the CDR cell, comprising banking industry officials, to see if borrowers, in collusion with bankers, are misusing the CDR mechanism for personal benefits.
The move comes after a recent conference where CBI chief Ranjit Sinha raised the issue of the rise in bank frauds particularly those involving amounts of over R50 crore. He had also alleged that the agency has had problems with the delay on the part of the banks in reporting frauds as it in turn impacted the agency’s efforts to track several crimes and its proceeds.
According to the CVO of a PSB, the CBI is well within its powers to ask for such information (list of CDR cases) which could be relevant to their investigation. The CVO said the CBI’s letter does not amount to giving any direction to CVOs or tantamount to proceeding against any bank officers, as in such cases it requires sanction from various authorities including the Central Vigilance Commission (CVC) and the government (the finance ministry, in the case of high-ranked bank officers).
"The CBI has only asked the CVOs to see if there is any wrongdoing or suppression of facts or withholding of information, and state what really led to these cases being referred to the CDR cell," the official said. The aim of such vigilance activities is not to stifle risk taking, which is central to the banking business, but only to prevent malpractices and