Rs 2.22 lakh cr NPAs: CBI chief Anil Sinha suggests strong action

By: | Updated: July 17, 2015 9:25 PM

CBI Director Anil Sinha today favoured "strong action with surgical precision" to check banking frauds which has led to accumulation of non-performing assets...

carpool, sharing economy, carpool in india, personal financeAs per the RBI handbook of statistics on Indian economy, the NPAs have grown from around Rs 45,000 crore in 2009, to more than Rs 2.22 lakh crore in 2014.

CBI Director Anil Sinha today favoured “strong action with surgical precision” to check banking frauds which has led to accumulation of non-performing assets (NPA) worth Rs 2.22 lakh crore with the banks.

Addressing a conference of anti-corruption officials here, he said a strict regimen that instills financial discipline and deep-rooted sense of probity percolating down to the lowest rungs in the financial sector, especially banks and other financial institutions engaged in lending, is the need of the hour to detect the frauds.

“Probably, this may see a rise in the detection of frauds and bad debts, not to forget the NPAs, that have remained hitherto under the carpet, like the proverbial skeletons tumbling out of the cupboard,” Sinha said.

Advocating strong action with surgical precision, he said, the imperatives require caution against both, the tendency to bury our heads in sands of time like ostriches and also the eagerness to cry wolf without seeing one.

“We need not be kind to the mercenaries, at the same time we must also be wary of unleashing terror in the market,” Sinha said at the annual conference of Chief Vigilance Officers, who act as distant arm of the Central Vigilance Commission (CVC), of banks and financial institutions here.

The sixth conference today was held in the backdrop of a rather serious scenario vis-a-vis bank frauds. The period from 2009-2014 saw a sharp increase in bad loans and advances leading to an alarming rise in NPAs across the banking sector, he said.

As per the RBI handbook of statistics on Indian economy, the NPAs have grown from around Rs 45,000 crore in 2009, to more than Rs 2.22 lakh crore in 2014. Even in percentage terms, the NPAs have grown from 2 per cent of gross advances in 2009 to more than 3.8 per cent of gross advances in 2014, the CBI chief said.

“If we add to the NPAs, the poorly performing restructured loan accounts and other sub-standard assets, the situation becomes even more grim,” he said.

Sinha said though the NPAs had grown in the last five years, there was under-reporting of frauds for a variety of reasons which is linked to the larger issue of corporate governance in banks.

While acknowledging the impact of market dynamics of a globalised economy, we cannot also be oblivious to the deliberate undue accommodation in big ticket lending, he said.

The CBI chief said the Reserve Bank of India (RBI) has identified 45 early warning signals in loans and advances and has introduced the concept of ‘Red Flag Accounts’.

The new framework also seeks to incentivise declaration of frauds by banks in order to dissuade the existing tendency to hide them. Ever greening of sub-standard assets through restructuring or grant of additional facilities has also been now prohibited, Sinha said.

The CBI Director said the number of bank fraud cases, including big-ticket frauds getting registered with the CBI is expected to see a substantial increase.

“There is going to be an increased responsibility on the CVOs of banks to ensure that the complaints filed with CBI are comprehensive and contain a full disclosure of all facts so that the investigations can be concluded expeditiously and the wrong-doers are brought to justice swiftly. This will pose certain new challenges for the CBI as well,” he said.

The complexities of cases to be investigated would demand a still higher level of domain expertise from the CBI investigators. Sensing this, CBI has already taken steps to augment the capabilities of its investigators and prosecutors, Sinha said.

He said the CVOs have a very important role to play in the process of detecting and reporting bank frauds.

“Recognising their key role, the Ministry of Finance has recently designated the CVO as the nodal officer for reporting of frauds over Rs 50 crore. However, the institution of CVOs needs to be further strengthened and suitably empowered to ensure impartial reporting of bank frauds,” he said.

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