Public sector banks (PSBs) have penalised employees in more than 5,000 instances between January 2015 and March 2017 with more than half of them being in 2015, the government's reply to a question in the Parliament showed.
Public sector banks (PSBs) have penalised employees in more than 5,000 instances between January 2015 and March 2017 with more than half of them being in 2015, the government’s reply to a question in the Parliament showed. Action taken includes employees convicted, and awarded major or minor penalties including being dismissed from service. According to the data, India’s largest bank State Bank of India (SBI) has taken action in 1,538 cases during the same period with the bulk of it — 888 instances — in 2015. SBI had 2,13,238 employees as of March 2015; 2,07,739 employees as of March 2016; and 2,09,567 as of March 2017. Chennai-based Indian Overseas Bank (IoB), already under the Reserve Bank of India’s (RBI) prompt corrective action (PCA) list, took action in 449 cases in the 27 months under review. IoB is followed by Central Bank of India, also under PCA, with 406 instances of employees being penalised for fraud during January 2015 and March 2017. Meanwhile, Punjab National Bank, which is in the middle of a Rs 11,300-crore fraud, has taken action in 184 cases during the same period. According to the government’s reply, although “PSBs have about 70% market share, the incidence of such frauds in private sector banks is higher than in PSBs”.
The data showed that while there were 8,622 cases of fraud in PSBs, private sector banks had 4,156 cases of fraud committed with 1,146 and 568 employees being involved in them, respectively, between 2014-15 and 2016-17. In 2015, the RBI had issued guidelines on red-flagged accounts (RFAs) to enable banks to detect and report frauds early and take timely actions like reporting to the investigative agencies, examining staff accountability and do effective fraud risk management. An RFA is the first step towards identifying fraud and could be applicable to both a standard loan — where the interest is being paid regularly — or a bad asset — one where the borrower has defaulted.
An account is typically classified as an RFA if the borrower defaults on payments, if high-value cheques bounce or the company is raided by tax authorities, whether the income tax, sales tax or central excise departments. Moreover, frequent changes in the scope of the project to be undertaken by the borrower also prompts lenders to red-flag the account. Further, funds coming from other banks to pay off existing dues is also viewed suspiciously.