SFIO may probe top 50 cases of wilful default in state-run banks

NEW DELHI: The increase in cases of fraud in state-run banks is likely to prompt the government to rope in the Serious Fraud Investigation Office or SFIO to probe top 50 cases of wilful default.

“We are looking at various mechanisms to ensure more timely and coordinated action by the law enforcement agencies,” said a government official, requesting not to be named.

This includes involving the SFIO, the official said. He said the move is expected to complement the fraud registry being set up by the Reserve Bank of India which will be a centralised searchable database that banks can access.

Private Banks will also report frauds over a threshold to SFIO directly, for which a mechanism is being put in place, he said.

There are more than 7,000 wilful defaulters with state-run banks, with outstanding amount of almost Rs 60,000 crore. So far, first information report has been filed in 1,347 cases. “It has been found that in case of consortium lending or multiple banking it takes time to detect a fraud because of divergent opinions of lenders,” the official said.

In case of a wilful default, an investigation can be done to ascertain whether the borrower has siphoned off money in collusion with bank officials, he said. The Central Bureau of Investigation is already investigating Vijay Mallya in a Rs 900 crore loan default case along with some officials of IDBI Bank, the lender in this case. Last week, the investigating agency also conducted raids at some offices of the UB Group, the parent company of Kingfisher Airlines.

The government may further ask banks to share details of Red Flagged Accounts (RFA) with investigating agencies in a timely manner. As per RBI guidelines, an RFA is one where a suspicion of fraudulent activity is thrown up by the presence of one or more early warning signals.

Other investigating agencies such as CBI and the Central Economic Intelligence Bureau will also share their database and work with banks to conduct criminal and internal enquiry simultaneously. At present, state-run banks need to report to CBI any fraud activity in an account.

The corporate affairs ministry is already planning a makeover of SFIO to turn it into a multi-disciplinary investigative body where experts from diverse sectors such as accounting, banking, capital markets regulation, law, forensic audit and taxation work to unravel corporate frauds.

“We are already looking in some cases such as that of Deccan Chronicle Holdings,” said an SFIO official.