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This missive comes in the light of arrest of Bhushan Steel’s erstwhile promoter Neeraj Singal by the Serious Fraud Investigation Office (SFIO) for allegedly siphoning of funds.
The sources said that bankers could be held accountable under Section 120B of Indian Penal Code if they fail to report fraud in an account which is later unearthed by investigating agencies, sources said.
If the investigating agencies find diversion of funds in those defaulting accounts, bankers may be liable to face criminal proceedings, the sources said, adding that this advisory is like an extra precaution to keep bankers from getting into legal tangles.
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Indian banks are facing mounting non-performing assets (NPAs) or bad loans, especially at PSBs, which have reached more than 8 lakh crore. In addition, several banking frauds have been unearthed, including the 14,000-crore scam at PNB, carried out allegedly by diamond jeweller Nirav Modi and his associates.
A senior government official confirmed the development and said that some discrepancies had been pointed out in the case of a steel-maker and a real estate firm among 10-12 companies.
“There were some inputs and lenders who have been asked to provide transaction details of last five years. If required, banks will also undertake forensic audit,” he said. Earlier this month, the SFIO arrested Mr. Singal for alleged diversion of 2,000 crore, raised through loans from state-owned banks.
Associate firms involved
“Similar modus operandi has been used by other promoters also,” said another government official, adding that there had been Intelligence inputs on associate companies being used for similar transactions.
SFIO is also looking into the books of companies which are currently undergoing debt resolution, he said, adding that this had been done on the basis of specific inputs provided by the Ministry of Corporate Affairs. During the resolution process, the extensive audit of bankrupt companies has thrown up financial irregularities in several cases.
In June 2017, the Reserve Bank of India (RBI) had identified 12 stressed accounts, each having more than 5,000 crore of outstanding loans and accounting for 25% of the total non-performing assets (NPAs) of banks for immediate referral under the Insolvency and Bankruptcy Code (IBC). In August, RBI had sent a list of 28 more firms to lenders for resolution by December 2017. “These accounts also have some firms from the second list and those where later banks filed cases in NCLT (National Company Law Tribunal),” said a bank executive aware of the developments.
The NCLT benches handle banks’ bad debt resolution under Insolvency and Bankruptcy Code (IBC).
Banks have to undertake a two-year transaction audit when they start the resolution process through IBC. In case there are any issues or specific information, banks also conduct a forensic audit.
In August 2017, the SFIO was given powers to arrest people for company law violations. SFIO is a multidisciplinary organisation having experts for prosecution of white-collar crimes and frauds under the company law.