Banks And Borrowers , Both Are Now Afraid Of Forensic Audit

For last two years , a new term called as 'Forensic Audit ' has been a point of debate , fear and appreciation in banking circle.

Bankers are afraid of forensic audits ordered by RBI against some of banks and borrowers are afraid of foresic audit ordred by some of banks against defauling borrowers.

A wave of fear is blowing and has shaken the mind and heart of many corrupt bankers and many willful defaulters of banks.

Perhaps this is the first time after nationalisation of banks and specially after the launch of steps towards reformation in banks in the year 1991 , that both bankers and borrowers are epxeriencing fear of action for their evil acts.

People of India have now understood that corruption at any level cannot go unnoticed for a long period and corrupt officials are to face the trial in court sooner or the later. However as long as politicians use bank for serving their self interest and for vote Bank, only bankers cannot do anything to cure sick banks.

It is therefore need of the hour to enlighten bankers about Forensic Audit.


What is a 'Forensic Audit'
A forensic audit is an examination and evaluation of a firm's or individual's financial information for use as evidence in court. A forensic audit can be conducted in order to prosecute a party for fraud, embezzlement or other financial claims.

A forensic audit is the process of reviewing a person's or company's financial statements to determine if they are accurate and lawful. Forensic accounting is most commonly associated with the IRS and tax audits, but it may also be commissioned by private companies to establish a complete view of a single entity's finances.

Financial forensics
A field that combines criminal investigation skills with financial auditing skills to identify financial criminal activity coming from within or outside of an organization. Financial forensics may be used in prevention, detection and recovery activities to investigate terrorism and other criminal activity, provide oversight to private-sector and government organizations, and assess organizations' vulnerability to fraudulent activities

Financial forensics is similar to forensic accounting, which utilizes accounting, auditing and investigative skills to analyze a company's financial statements for possible fraud in conjunction with anticipated or ongoing legal action. Forensic accountants may also work with government agencies, including tax authorities, to recover illegally obtained funds or help prosecute money laundering. Forensic accountants can also help companies design accounting and auditing systems to manage and reduce risk.

When Are Forensic Audits Used?
Forensic audits are used wherever an entity's finances present a legal concern. For instance, it is used in cases of suspected embezzlement or fraud, to determine tax liability, to investigate a spouse during divorce proceedings or to investigate allegations of bribery, among other reasons.

Forensic audits are performed by a class of professionals with skillsets in both criminology and accounting who specialize in following a money trail, keeping track of fraudulent and actual balance sheets and checking for inaccuracies in overall and detailed reports of income or expenditures. If they find discrepancies, it may be the auditor's job to investigate and determine the reason for it, or it may be the job of a separate financial investigator.

Auditing for Quality Control
While many associated auditing with finding flaws, it can be just as important to strengthen a company's already good business practices. Many companies self-audit on a regular basis to make sure that production and workflows are running smoothly without waste. By presenting regular audits of sound financial practices, a company improves its standing for shareholders, clients and customers, and the report generated by the audit gives executives a better sense for the internal finances of the business.

Of course, this can lead to a downside if the auditing company itself is committing fraud or if it is in collusion with the company or its managers to falsify reports. In this case, a forensic audit may be requested by a judge or an outside company to either determine the lost income as a result of a fraudulent report or to determine the damage that falsified reports caused to shareholders, clients or employees.

How Are Forensic Audits Used in Court?

Forensic audits are presented as evidence by a prosecutor or by a lawyer representing an interested party. Because finance is a complex discipline, the jargon used by forensic auditors to describe a company's financial position is often highly precise. This either requires a prosecutor or lawyer to call upon expert witnesses to explain the significance of the audit in layman's terms or to have the auditor do so himself or herself in order to build a case.


Promoters fearing forensic audits get help to clean up books -Economic Times

A promoter of a mid-sized Mumbai-headquartered infrastructure company, which has a stressed loan of about Rs 800 crore from a consortium of public sector banks, has just divorced his wife. One may wonder what's the connection given that it's a personal matter, but for the fact that this was a specific advice given to him by his financial consultant to secure him.

As promoters fear the prospect of facing a forensic audit from banks, they are roping in middlemen, or " financial consultants", to advise them on how to secure themselves from such investigations. The main job of these experts is to conduct a mock forensic review of the company, point out the problems, and suggest a solution.

There are a variety of firms that are giving advice to borrowers about what to do and how to manage situations in which banks and investors are initiating a forensic audit of borrowers.

The fear of forensic audit comes after the Reserve Bank of India (RBI) had asked banks to conduct such audits on their stressed loans. The main objective of this exercise is to find out whether the loan was diverted.

"Many banks are conducting forensic audits on the borrowers' accounts mainly to check how the promoter has been using the funds. Most of the time, the banks rope in forensic experts with the mandate to check the transactions in the company for a period of at least a couple of years before signs of stress are visible in the account..
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Bankers that were up until recently using the threat of conducting a forensic audit on lenders are now wary as promoters are trying to cover their tracks, like in the case of the promoter who has divorced his wife. "He has transferred his Nepean Sea apartment in his wife's name and then divorced her, although they continue to live together. This is mainly done so that banks can't enforce the personal guarantee," said a banker with one of the lenders.

While many promoters are wary of going ahead with asset stripping, many are using techniques to save them from being declared a "wilful defaulter".


FORENSIC AUDIT IN BANKS – PURPOSE, SCOPE AND END RESULT

                                             by

Pannvalan

Preface

By definition, ‘Forensic Audit’ means “an examination and evaluation of a firm's or individual's financial information for use as evidence in court. A forensic audit can be conducted in order to prosecute a party for fraud, embezzlement or other financial claims”.  Thus, in the context of a bank, all financial transactions and decisions involving finance are analysed with a view to arrive at the truth.  Forensic Report can be admitted in a court trial and forensic auditors may directly submit evidence in the court or depose before a judicial authority.

 But, a forensic audit does not stop with mere audit of accounts. It goes a step further and find out the basis on which each decision was taken.  Since decisions could be of myriad types that could directly impact the financial affairs of an institution, it is imperative that we shall probe all types of such decisions taken in the bank concerned. 

 One must start with the questions – (a) Whether the person who had taken the decision in question enjoyed expressly delegated authority?  (b) Whether the decision was taken at the right moment (neither in haste nor after a delay)?  (c) Whether the decision was promptly reported to the next higher authority? (d)  Whether any mistakes of the past were repeated?  (e)  If the result of the decision made was just the opposite to what was intended, what were the remedial steps initiated?

 Now, let us discuss about the decisions taken and activities performed in each area/domain.

 

1. Credit Decisions

Credit is the area where forensic auditors concentrate first and start their probe.  Credit decisions must be compared with RBI policies and guidelines, individual bank’s credit policy and finally the general laws of the land.  If any deviation or violation is found in such a context, it is taken up for deeper investigation and reporting.

2. Investment Decisions

Investment decisions taken are compared with the objectives of investments made and actual returns are compared with anticipated returns. Other aspects like loss incurred if any and its magnitude and whether such loss could have been prevented are also analysed.  In case of lower profit, causes for the fall in profit are gone into.  It may be remembered that many investments escape the attention and scrutiny of concurrent auditors and statutory auditors as of now, due to paucity of time.

3. Income and Expenditure

Transactions involving both income and expenditure are taken up for investigation.  Income/Revenue foregone/lost and Expenditure that exceeded the normal levels are specifically probed.  The possible connection between a series of transactions is also analysed.  If the loss was deliberate, the forensic audit will probe the background of the true beneficiary in all such cases.

4. Violation of Regulator’s guidelines and prescriptions

Instances of deviation from/violation of the regulatory authority’s rules and guidelines are probed.  The fall out of these on the bank’s image and reputation, discipline, financial risks and loss if any are examined.  Obviously, the penalties levied by the regulator (RBI) for such deviation/laxity/violation are also covered in the report.

5. Unlawful activities

This is similar to Point No.4.  In this case, any activities carried out by the bank in contravention of the laws of the land are analysed from various perspectives and all their dimensions are brought out.  Ramifications of such activities, particularly the loss to the bank customers and general public and the possible threats to the nation’s economy will be dealt with.

6. Wrong Persons Vs. Wrong Decisions

This is an important aspect to be looked into unfailingly.  Mistakes made in placement will reverberate in all other areas.  No average human being is infallible.  But a person with a bad character and a history  bad behaviour in the past can vitiate the whole atmosphere.  So, a forensic auditor will look into this aspect too.

7. Illegalities in Recruitment, Promotion and Transfers

Any illegalities or irregularities noticed in recruitment, promotion and transfers must be subjected to further probe for necessary corrective measures.  I do not want to go into the various types of irregularities here, as this subject directly concerns the H.R. Department of the bank.  Most of the senior bankers from different banks will have several real stories to be shared in this connection.  But nobody can dispute the fact that selection, recruitment/promotion and placement of wrong persons at critical positions will cause immeasurable harm.  So, forensic audit must necessarily cover this subject.

 8. Organisational Structure

Banks in India have different organisational structures.  Even among the same group of banks, say public sector banks, this difference is quite conspicuous.   It is the prerogative of each bank to decide its structure.  But, while determining the organizational structure of a bank, proper attention must be paid to the geographical area of operation, organizational culture, period of transition if any etc.  Merely copying another bank in this regard will be suicidal.  Unscrupulous branch expansion is one area that is a grave mistake committed by all banks in the recent past.  Without recruiting adequate manpower and imparting necessary training to them and without investing adequate money in fixed assets and modern technology, indiscriminate branch expansion may result in huge loss.

 9. Systems and Procedures

Forensic Audit also looks into the systems and procedures followed by each bank and compares them with the industry.  Any deficiencies in the systems and lacunae in the procedures will weaken the bank.  This is one sensitive area which if neglected will result in delays, growing customer complaints, monetary loss, frauds and uncertainty in many areas.  So, forensic audit is to cover this topic also.

 10. Strategy

Strategies adopted by the bank may not be as effective as was planned.  So, changing of strategies may be prescribed by the forensic auditors. Dropping some product lines, pricing of products, adding new products in tune with the changing times and customers’ preferences, packaging of each product with additional features etc. may be thought of and recommended.  However, forensic auditor must act with extreme care and responsibility here, as otherwise he may compete with the bank’s consultants.

 11.Corporate Governance

Infusing more professionalism in the administration may be called for. Codification of corporate ethics, Transparency, Accountability and Truthfulness in the functioning of the bank and honesty in business transactions and simplified reporting of results in critical areas will achieve wonders.  Therefore, the forensic audit will attempt to remove the veil of secrecy in all unwanted areas and shall suggest suitable ways to adhere to the corporate ethics chosen by the bank voluntarily.

 12. Respecting the wishes of all stakeholders

The bank must do a balancing act to maximise the shareholders’ wealth by improving profitability, take several staff welfare measures to keep the employees happy and motivated and comply with all statutory requirements promptly and adequately as per the directions of the regulator.  In this area, the forensic auditor can make very valuable suggestions.

 13. Relativity with others in the industry

While competition is inevitable in today’s world, the bank must have some understanding and better co-operation with all other players to protect their common interests.  For this purpose, a professional body or association at all places and levels is needed.  This is different from Indian Banks’ Association whose role and responsibilities are entirely different. Here, sharing of vital information among all the banks in various ways is essential.  If a bank fails to either share its data/information with others or fails to utilise the information available with others, it may jeopardise its health. Forensic Audit must address this issue too.

 14. Social Responsibility

A good commercial organisation doesn’t cater to the needs of select segments of the society alone.  As a mark of gratitude to the society, it sets aside a part of the profits it earned for social and philanthropic activities.  To survive and grow further, a bank must learn to imbibe this in its organisational culture. Though this subject lies outside the jurisdiction of forensic audit, there is nothing wrong if some constructive suggestions are offered by the forensic audit team members.

 

Conclusion

As far as I am concerned, a forensic audit shall not stop with examining only the financial transactions of a bank.  As the quality of decisions made and their end result are the direct outcome of different departments within the bank, forensic audit cannot overlook other functions of the bank.  Then only a total and comprehensive picture can be obtained.  To be effective and successful, forensic audit must study various inter-related activities of the bank carefully and submit its report within a reasonable time.

Banks under lens: RBI plans forensic audit of 10 defaulters -Economic Times

The Reserve Bank of India (RBI) plans to conduct forensic audit of 10 defaulters to know whether lenders followed established practices and processes while sanctioning those loans, said people close to the development. The central bank may invite interests from agencies to conduct these audits by April end, said those people who did not wish to be identified.

Among the borrowers could be companies involved in mobile technology, shipping, power and roads, they said. The loan accounts vary between Rs 2,000 crore and Rs 5,000 crore.
"This is separate from the forensic investigations that banks conduct," said the person. "The scope of these investigations would include whether there were any lapses on the part of the lenders." RBI did not respond to an e-mail seeking comment.


Reserve Bank of India Governor Raghuram Rajan is determined to clean up the Indian banking system by March 2017 as their mounting stressed assets cripple their abilities to fund new projects. While many of the stressed loans (bad loans + restructured loans) may be due to the slowing economy and wrong policies, some could be due to malfeasance. The central bank is going the extra mile to differentiate between the two.


Although banks conduct their own forensic audits, they are limited in scope -probably to know whether the promo ter siphoned off funds and not whether bankers were at fault.
"Banks tend to limit the scope of investigations on what wrong the promoter did ," said the person. "While the RBI wants to know if the banks were sleeping at the wheel, as they lent to these companies."

This would be the second ti me when the RBI would be directly conducting forensic audit. In 2015, RBI hired two multinational consultancies to investigate defaulters Su rya Vinayak Industries and Deccan Chronicle Holdings.
When it led to the conclusion that banks violated norms in the case of Deccan Chronicle Holdings, RBI penalised 12 banks.

In both the cases -Surva Vinayak Industries and Deccan Chronicle Holdings -at least two banks had conducted their forensic audits. "While the fine was only about Rs 5 lakh to Rs 40 lakh, this was more like rap on the knuckles," said a banker. If it is proven that in any of the 10 non-performing assets ( NPAs) banks had not followed the procedures, they may be penalised.

The audits may also be a guide to plug the gaps in bank supervision.
"I think it's not just to fine the banks that these independent investigations are carried out," said the banker. "It is also to look at whether there are any loopholes and if additional guidelines, regulations could be framed to prevent similar situations."
The regulator may avoid clashing with other investigative agencies in this matter as it would keep away from those probed by other agencies such as the Central Bureau of Investigation.

"The RBI also wants to see if there are any sectoral problems in these companies as well. But the regulator doesn't want to look into companies which may be investigated by CBI or other agencies," said the source.

Read more at:
http://economictimes.indiatimes.com/articleshow/51523796.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Banks order forensic audit of accounts at first hint of trouble
-Business Standard
Forensic audit firms are seeing a surge in demand from banks to probe accounts that have not defaulted but might have started to show some early signs of trouble.

Lenders started making this request in the face of pressure from bad loans. Forensic auditors said banks usually use these services once a company defaults on repayment. But, now, lenders are not waiting for a default to happen and are on the vigil if they sense trouble in the offing. Babbar, executive director, Fraud Investigation & Dispute Services, EY, said banks were now following a proactive approach and would be looking at using forensic audits if they suspect any trouble in the account.

Analysts said sometimes a promoter would not have defaulted on a loan to a particular lender but might have had trouble in meeting a repayment deadline at other banks. This might raise an alarm. Bankers have their ear to the grapevine to catch news of companies being in trouble or of a possible fund diversion.

“We also do asset-tracing for banks. But sometimes by the time we get there, it is too late,” said Reshmi Khurana, managing director of Kroll India. “So what needs to happen more often is a systematic monitoring of accounts that are in distress and not wait for them to get into corporate debt restructuring. And, we have been seeing that banks have started coming on to us early to ask for audit rights of a company and gain additional information which can provide leverage in times of negotiation with the promoters. Sometimes they are called before the default.”

In fact, the Finance Standing Committee of Parliament had recently called for an immediate forensic audit of all restructured loans that had turned into bad debts. This comes at a time when the stressed assets in the system were believed to be about 11.24 per cent of advances at the end of the quarter ended September.
Apart from this, banks have also become cautious in internally identifying accounts that might need attention. As a result, audit firms have seen an increase in demand for training purposes as well.

“The demand for anti-fraud training by banks of frontline staff has also increased. With the Reserve Bank of India (RBI) insisting on banks cleaning up the books, there has been a surge in requests for forensic audits. In the last quarter, these requests have increased by almost five times,” added Babbar.

A systemic review carried out by RBI, which had asked banks to recognise certain assets in the December- and March-ended quarters of this financial year, had led to an increase in bad loans. The central bank had also prodded banks to step up the fight in tackling the rising non-performing assets’ issue.

26th August 2014
FinMin orders forensic audit of UCO Bank-BS
( my opinion is given below this news items )
The government has ordered limited forensic audit into some non-performing accounts of Kolkata-based UCO Bank to find out any irregularities, if any, in sanction of loans.
"We have ordered a limited forensic audit after complaints were filed with regards to some accounts. Those accounts have turned non-performing," official sources said. This is the fourth public sector bank (PSB) where forensic audit is being conducted after alleged cash-for-loan scam came to light with the arrest of Syndicate Bank Chairman and Managing Director S K Jain earlier this month. Jain was arrested for allegedly receiving a bribe of Rs 50 lakh to enhance credit limits of Bhushan Steel and Prakash Industries. Forensic audit is being conducted against Dena Bank and Oriental Bank of Commerce (OBC) where some officials were suspected of misappropriating funds worth Rs 436 crore from their fixed deposit customers.

The gross non-performing assets (NPAs) of the state-run UCO bank stood at Rs 6,346.32 crore at the end of June. In percentage terms it was 4.31 per cent of the total advances. At the same time, net NPA of the bank stood at Rs 3,344.02 crore. The bank sold NPAs worth Rs 1,545 crore during the fourth quarter of 2013-14. This was almost five times the value of bad loans it sold in the previous three months.
Gross NPA of the public sector banks increased from Rs 1,64,462 crore to Rs 2,27,264 crore at the end of March 2014.

Financial Stability Report released by RBI recently said that infrastructure, iron and steel, textiles, mining and aviation services contributed significantly to the level of stressed advances. The share of these five sub-sectors in total advances is the highest for public sector banks. The amount of loan restructured rose more than 11-fold between 2010-11 and 2012-13. At the end of 2010-11, the restructured loans stood at Rs Rs 6,614.40 crore that rose significantly to Rs 76,479.06 crore at the end of 2012-13.
Link Business Standard

My Opinion expressed  on 27th August 2014 after reading above mentioned news is as follows:
Regulators like RBI and SEBI and owners lime Government of India were sleeping for decades. They never bothered for what was going on in pubic sector banks. Officials of RBI , Team of Chartered Accountants, Team of vigilance officers and teams of bank's internal auditors mostly used to be victim of bribery and gifting culture extended to these high profile persons when they used to visit their banks for audit , inquiry and inspection.

Post of ED and CMD used to be auctioned in lacs of rupees and these EDs and CMDs then used to promote such culture in their banks. Large scale corruption in loaning , large volume of frauds and lacs of public complains against banks could not pull out these dignitaries from hibernation . All officers who have been assigned the task of protecting banks normaly used to sleep and enjoy. It will not be an exaggeration If one say so.

Draupdi Chirharan used to take place and protecting agencies used to sleep or preach sermons. Banks continued to be looted by bank officials, business men and politicians in nexus with all these regulating agencies who are supposed to be watchdog for banks and who are supposed to be protectors of bank.

I salute Chairman of United Bank who boldly resigned from the post of CMD of United Bank when she found foul game being played in all higher offices and that in her own bank . It is she who scarified the lucrative post of CMD and ignited fire in banking arena. It is she who could speak about volume of NPA in UBI and awakened the officials of RBI and CBI and ministers from their deep slumber and opened the eyes of media pesonnels.

Still there is no doubt to me that all so called big banks are having volume of bad debts concealed and they continue to get blessings from their mentors. It was for the first time that RBI, to get rid of public revolt and media questions ordered forensic audit of United Bank. It is different and Unfortunate that under pressure of senior officials, ministers and politicians , they somehow or the other , again put carpet on findings of forensic audit and just made mockery of word "Forensic Audit" .

Since then RBI has ordered forensic audit against Allahabad Bank, Syndicate Bank, Dena Bank, Oriental Bank and now against U Co Bank. Very soon they will order forensic audit of Central Bank, Punjab National Bank, State Bank and gradually to all public sector banks. But ultimately perhaps nothing will happen to real culprits.
　
Because if all culprits are exposed, then they will unite together and call for forensic audit of RBI, Government of India, CVC , CVOs, CAs who used to give good health certificates to all these banks every year despite existence of volume of serious irregularities and deep rooted corruption in almost all banks and in almost all branches.

Not only this they will stop credit growth and puncture dream of GOI of achieving GDP growth of 8 to 10 percent in India. In the past also clever bankers pleaded to keep banks above CVC and CBI and outside the jurisdiction of CVC and CBI. Clever bank officials never accept the ground reality but put entire blame on Global recession and blame the system to hide their evil tasks and they plead so cleverly that no one doubts .


India is great in culture of certificates and culture of banners and hoardings. Whenever there is any complain from media or public or from customer or shareholders , regulators will ,as a rhetoric and to follow a well established culture issue a letter to the concerned bank and ask for certificate that there is no merit in public complain. When cobra Post exposed fraud in KYC compliance, all these so called protectors flocked together to put carpet on findings of Cobrapost. One can find numerous hoarding in bank speaking about corruption less banking and saying as if "Honesty is really the best policy" for bankers.They as a ritual take oath in every November on Vigilance Day and publicise it in newspapers to earn false name and fame in public domain.


In the same way , whenever people of India writes against corrupt officials of any bank, a team of corrupt top officials will join together to provide shield to brother trapped and leave no stone unturned to free him from charges of corruption. They will manage all certificates and destroy all files, papers and documents which may harm them in future to prove that charges of corruption against alleged officers are not founded, biased ,false and baseless. This is why none of top officials have ever been punished during last two decades though starting from Harshad Mehta scam several stories of bank scam have come to light It is the culture not only in banks but in all departments of Government that a most corrupt officer or the most inefficient and unskilled officer is entrusted task of investigation whenever pressure comes from above to inquire into charges of corruption levelled against senior officer of the bank.


Now CBI have boldly come out against corruption in banks ( not against politicians )after getting powers from Supreme Court. It is CBI which has unearthed the story of bribery in Syndicate Bank and then taken action against other banks too. Before that GOI never gave permission to CBI to proceed against any corrupt officer as if banks are free of corruption. The obvious reason is that entire government run by Congress Party and UPA was made of corrupt politicians. And hence action was never taken against any corrupt official or any politician despite so much hue and cry made by Team Anna , Ramdeo Baba and other social wings against Coal scam, CWG scam, 2G scam or several other such serious nature scam. Even in coal scam and 2G scam , the then ruling party never accepted that there was any illegality. They thought it better to order hundreds of inquiry against people associated with Team Anna or Team Ramdeo.


Now Supreme court has proved and accepted that there was no legality in allotment of coal mines. Similarly CBI and Supreme court in coming days will prove that there is hardly any loan ,specially in high value loans which are without game of bribery.Not only role of bribe and gift is behind all corrupt dealings, but role of woman and wine have also played big games.


I had several times written in blog that great Prime Minister Manmohan Singh will prove to be disaster for the country and corruption will never end as long as Congress Party will remain in power. I hope now under NDA government led by Mr. Narendra Modi , level of corruption will come down to a great extent .

I am fully confident that Mr. Modi , PM and Mr. Jaitley FM will not provide shield to any corrupt top official and politician . I hope they will  allow CBI to perform without any hurdle and without any fear of action from GOI. I however suggest GOI to put CBI also under surveillance of ROW or IB or CVC or some other powerful agencies.


It is not enough for RBI to order Forensic audit, it is the duty of RBI and GOI to ensure time bound action against all erring officials and all erring politicians who promoted bad culture in banks even if persons like Mr. Chidambram or Mr. Mukejee are found on wrong track and required to be punished for giving illegal orders on phones to various ED and CMDs of banks and other PSUs. Once actions starts pouring on top guns, there is no doubt that corruption in lower level will gradually come down.

Last but not the least , To save banks from disaster ,GOI and RBI will have to stop loan waiver culture . They will have to stop culture of bribery and flattery in recruitment and promotion to strike at the root of all malady. GOI will have to completely separate loan and Charity from each other. Charity game from bank which is basically a lender has damaged the culture of lending and to a great extent responsible for rise in corruption and rise in bad debts in PS banks. Act of loan and act of charity can go together.


I like to reiterate here that case of S K Jain CMD syndicate bank trapped by CBI in bribery is only tip of the iceberg. There are hundreds of senior officials who are still away from CBI net . There are several officials who have reached top position only by using wealth, wine and woman. It is proper to point out here that Mr. Jain was trapped by CBI for accepting bribe for sanctioning a loan of Rs.100 crore to Bhusan Steel, a company which got success in getting sanction of loan amounting to Rs.40000 crore by not one or two banks but by 35 banks. Further is not isolated cases of Bhusan Steel only whose Rs.40000 crore is likely to be bad , but there are several such cases which either already turned NPA or are almost on the verge of it.

It is not isolated case of S K Jain whose marks were inflated by Interview panel and who got full marks in Annual appraisal Reports b his appraiser and by reviewing authority despite several cases of irregularities and corruption associated with Mr. Jain as because name of Mr Jain was recommended by some Minister for the post of CMD. In public sector banks . all promotions right from scale I to III or from II to III or from III to IV and so on takes place on the basis of recommendation on officer possesses and on the basis of power of lobby he or she is associated.


There are many trade union leaders in many banks who act as middlemen between Interview panel members and promotion aspirants. Culture of changing marks in Annual Interview marks and giving full marks in Interview is nothing new in banks. This is normal phenomenon in all promotion processes taking place in banks. 'Ye mera admi hai' , 'ye netaji ka admi hai', 'ye GM or DGM sir ka najdiki hai' etc are common terminology which are tagged with flatterer officials and people predict success of such officers in promotion process much before result is out. For higher post, officers use the services of ministers, IT bigwigs,RBI big bosses etc.


Bank management always talk of merit oriented policy but in fact they never give respect to merit. There are hundreds of thousands of officers who have been sidelined like Ashok Khemka by Harayana government. There are many officers who have left taking part in promotion process and decided to lead a peaceful life in remote centres and spend time at corner tables kept for such officers who do not follow the current of corruption. Many officers decide to resign when torture and injustice cross the limit. Frequent transfers of such officers is not new phenomenon in banks as Mr. Ashok Khemka was subjected to by state government in Haryana to keep High command Sonia Happy.


I therefore always say that power of promotion and transfer is the root of bribery and flattery.

PSU bad loans: Will not spare defaulters looting our banks, says PM Modi-28.03.2016-Zee News--This news proves true what I had expressed whn Modi came to Power

Prime Minister Narendra Modi has said that the government will not spare those who have been looting the banks by not repaying the huge loans borrowed by them, and deal with them appropriately.

Blaming the UPA government for PSU bad loans and accusing the previous regime for letting off Vijay Mallya, the PM said that the government has started "tightening the screws" on the loan defaulters to start paying up.


CBI books Electrotherm for cheating Central Bank of Rs.436 crore-LiveMint-August 2014
Company requested credit to enable it to supply steel and iron to an other firm in Tanzania, CBI says
Aman Malik

New Delhi: The Central Bureau of Investigation (CBI) on Tuesday said that it had registered a case against the directors of Ahmedabad-based Electrotherm (India) Ltd and officials of state-owned Central Bank of India for entering into a "criminal conspiracy" and cheating the bank to the tune of Rs.436.74 crore.

The case was registered on a complaint filed by the Central Bank of India. "It is further alleged in the complaint that the company requested for credit to enable them to supply steel and iron to one other firm in Tanzania," CBI said in a statement.

A CBI official identified the Tanzania-based company in question is Kamal Alloys Ltd. CBI said that one of the directors in Electrotherm was also on the board of Kamal Alloys.
The agency conducted searches at nine places on Tuesday in Ahmedabad, Gandhinagar, Vadodara and Kutch in Gujarat.

Electrotherm "did not submit any proof of delivery of the material and defaulted on the loans taken", the agency said. CBI further said that "standby Letters of Credit (were) opened by the bank to facilitate trade in machinery and coal devolved." The bank had to make payment when Electrotherm did not pay the company it had taken the material from.

CBI has also alleged that Electrotherm made "false representations" to "induce the bank to extend credit facilities" to itself.

A company spokesperson could not be immediately reached for comment.
This is the latest in a string of cases involving public sector banks that CBI has begun investigating in the recent past.

On 2 August, CBI had arrested S.K. Jain, chairman and managing director of Syndicate Bank, allegedly for seeking a bribe to extend credit facilities to certain companies. In the same case, the CBI arrested 11 others, including Neeraj Singal, vice-president of Bushan Steel Ltd; Ved Prakash Agarwal, chairman-cum-managing director of Prakash Industries Ltd; and Pawan Bansal, a chartered accountant.

On 10 August, the CBI said that it was enquiring into IDBI Bank Ltd and Kingfisher Airlines Ltd, with an intention to look into the lender’s decision to sanction Rs.950 crore to Kingfisher Airlines at a time when the company had a negative net worth and negative credit rating.
IDBI Bank said later that it was not the target of the investigation. "The preliminary enquiry initiated by CBI a few months ago is against the borrower, KAL and not against IDBI Bank, as reported in the media," IDBI Bank said in a statement to the stock exchanges on 12 August.

As of March 2014, the gross NPAs of 40 listed banks was Rs.2.42 trillion, up 34.41% from Rs.1.8 trillion a year ago. Data for all 40 banks for the quarter ended June 2014 is not yet available.
　
http://www.livemint.com/Companies/pdFQRcVpKyYFWt3DGMtMZL/CBI-books-Electrotherm-for-cheating-Central-Bank-of-436-cro.html
20th August 2014

FinMin orders forensic audit of Dena Bank, OBC after reports of scam-Hindu Business Line
MUMBAI, 2014 AUG 20:
The Finance Ministry has ordered a forensic audit after reports of misappropriation of FUNDS worth Rs. 436 crore at the branches of Dena Bank and Oriental Bank of Commerce.

Dena Bank was TRADING down 4 per cent at Rs. 60.70 on the BSE at 2.20 pm. Similarly, Oriental Bank of Commerce was trading down 4 per cent at Rs. 263.55 on the BSE in late afternoon TRADE.

GS Sandhu, Secretary, Ministry of Finance, said, “These are instances which have happened at the lower/branch level because of lack of due diligence and non-adherance to the norms or procedures…So (it is) not fair to term the entire banking system or the individual bank going in that direction.

“The persons who are responsible are being taken to task, some disciplinary action is being taken and there are also some suspensions, some transfers…The investigation is on and further action will be taken based on that,” Sandhu said on the sidelines of a Real Estate and Banking conclave by Naredco.

According to a report, a Mumbai-based branch manager of Dena Bank mobilised (using middlemen) fixed deposits (FDs) to the tune of Rs. 256.5 crore from seven corporates, while in the case of OBC, misappropriation of FUNDS to the tune of Rs. 180 crore was reported (which was deposited by an organisation as fixed deposit).

In the wake of rising scams in public sector banks, the Finance Ministry is looking at various steps, including strengthening of risk management, appointment of bank chiefs for longer tenures, separation of posts and better quality of nominee and independent directors.

According to Sandhu, “The most important part is strengthening of risk management. We are going to make it mandatory for all the senior officers in banks for officers of DGM (Deputy General Manager) or GM levels to undergo a compulsory risk management course before they are considered for their promotions for higher posts…We have already started work on this through some expert agencies.”

The issue recently came to light after the arrest of Syndicate Bank CMD Sudhir Kumar Jain by the CBI in a Rs. 50-lakh bribery case.

On the issue of extending loans to Bhushan Steel by banks, Sandhu said that it was a commercial decision by a consortium of bankers… and “they are capable of deciding what has to be done”.
The RBI Deputy Governor, SS Mundra, said, "There are instances of individual failures. We would look into it. The regulations are robust enough and such failures happen because regulations are not followed. We will continue to bring more sensitivity to the issue and take punitive action where necessary."