Beginning Friday, the Department of Financial Services (DFS) will hold meetings with public sector banks (PSBs) individually to assess how they tackled bad loans in the previous three financial years (from FY12 to FY14). More significantly, it will have a close look at incidents of frauds in these banks and amounts involved.

The meeting comes in the backdrop of an RBI finding that large-value advance-related frauds were mainly concentrated in PSBs, rather than private or foreign banks. An objective of the exercise is to improve the system in each PSB to ensure timely detection and reporting of fraud cases as well as to prevent them, thereby improving corporate governance in PSBs.

At the meetings, starting with the crisis-ridden United Bank of India, the DFS will also see what action has been taken against bank officers/employees involved in these frauds and analyse systemic issues arising out of these frauds.

DFS officials, led by secretary GS Sandhu, will also look at the the number of wilful defaulters and the default amount involved, as well as efforts made by PSBs to recover bad loans, sources said.

Besides, it will scrutinise cases of debt restructuring as well as those assigned to Asset Reconstruction Companies (ARCs). The other issues on the agenda include stalled projects, as well as issues in consortium lending.

The focus on bank frauds and wilful defaulters follows several alleged instances of governance failures in these banks and a surge in NPAs. NPAs of PSBs have gone up from R1.64 lakh crore as on March-end 2013 to R2.28 lakh crore as on December 31, 2013.

Recently, when United Bank?s gross NPAs had jumped nearly 200% in absolute terms to R8,546 crore by December-end from a year ago, official sources had said that a Deloitte report had found that the bank deliberately under-reported its NPAs and that the RBI’s own inspection of the bank’s operations found ?serious governance failures?.

Though the ministry had said that there were no systemic issues, the focus on prevention of bank frauds is to ensure better governance, the sources said.

Outgoing RBI deputy governor KC Chakrabarty had in July last year pointed out that though the number of fraud cases has fallen from 24,791 in 2009-10 to 13,293 in 2012-13 (a decline of 46.37%), the amount involved has substantially shot up from R2,037.81 crore to R8,646 crore (an increase of 324.27%) during the period.