The banks follow a step-wise mechanism to declare an account 'fraud'. In the first phase, banks red-flag the fraud after which lenders take decisions based on a forensic report.
By Ankur Mishra
State Bank of India (SBI), Axis Bank and Canara Bank, along with a few others, have red-flagged GVK group-promoted Mumbai International Airport (MIAL) as a fraud account, sources familiar with the development told FE. The lenders have appointed Deloitte to conduct a forensic audit of MIAL, the sources added.
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Earlier this year in July, the CBI, in an FIR, had charged the GVK group promoters with siphoning off Rs 705 crore. The agency had accused them of causing a loss of Rs 310 crore to the exchequer by entering into fake work contracts on land given by the government. While emails sent to SBI, Axis Bank and Canara Bank remained unanswered till the time of filing the story, MIAL responded by saying ‘no comments’ to an email query.
The banks follow a step-wise mechanism to declare an account ‘fraud’. In the first phase, banks red-flag the fraud after which lenders take decisions based on a forensic report.
A May 2015 notification of the Reserve Bank of India (RBI) noted that the initial decision to classify an account as fraud would be taken by banks individually. It further said it would be the responsibility of the lender to report the fraud status of the account on the central repository of information on large credits (CRILC) platform. The time allowed for the entire exercise is six months from the date when the first member bank red-flagged the account.
If an account is declared fraud, banks need to set aside 100% of the outstanding loans as provisions, either in one go or spread over four quarters, according to RBI.
According to latest data released by the central bank in its annual report of 2019-20, the total value of frauds more than doubled in 2019-20. Total cases of fraud have increased 159% by value to Rs 1.85 lakh crore, compared with Rs 71,543 crore in 2018-19.