The Reserve Bank of India (RBI) said it is imperative on the part of banks to have a consolidated view of frauds committed by a borrower on different banks so as to ascertain the quantum of frauds, loss caused by the frauds and perceived ramifications.
?As such, all the banks which have financed a borrower under ?multiple banking? arrangement should take co-ordinated action, based on commonly agreed strategy, for legal or criminal actions, follow up for recovery, exchange of details on modus operandi, achieving consistency in data or information on frauds reported to RBI.
?Preferably, the co-ordination efforts should be driven by the bank which detects the fraud first or by the bank which has the maximum exposure, depending on circumstances,? said the RBI in a notification. It would therefore be necessary for the bank which detects fraud to immediately share the details with all other banks in the multiple banking arrangement, it added. ?It has come to our notice that certain unscrupulous borrowers enjoying credit facilities under ?multiple banking arrangement? have, after defrauding one of the financing banks, continued to enjoy the facilities with other financing banks and in some cases availed even higher limits at those banks,? said the RBI.
In certain cases the borrowers used the accounts maintained at other financing banks to siphon off funds fraudulently diverted from the bank on which the fraud was perpetrated, it added. This could be possible due to lack of a formal arrangement for exchange of information among various lending banks. While the affected bank was engaged in recovery or criminal action at its end, the borrowers went about perpetrating fraud in their accounts with the other financing banks. In some of the fraud cases reported by banks, it was revealed at a later stage that the securities offered by the borrowers to different banks were the same.
In September 2008, the RBI had issued circular advising banks to strengthen the sharing of information about the status of borrowers enjoying credit facilities under multiple banking arrangement, prescribing a system of obtaining declaration from borrowers, exchange of information among banks on regular intervals and obtaining regular certification by a professional regarding compliance of various statutory prescriptions.