CBI chief does some straight talking on financial scams, frauds

Mumbai: CBI Director Anil Sinha on Wednesday gave an earful to chiefs of top banks and financial institutions for the crises and scams plaguing the country's banking and financial sectors.

In a no-holds barred speech in the presence of Maharashtra Chief Minister Devendra Fadnavis, the Central Bureau of Investigation chief said the crisis in the banking and financial system 'runs deep'.

He said there was growing anguish among the public that while banks were strict on small/retail borrowers, the big borrowers and those who committed fraud on a large scale not only escaped the law but enjoyed the fruits of their crimes.

"Something is seriously wrong. While bank loan defaults can happen due to business risk and reasons beyond the control of banks, borrowers and regulators, yet a significant part of the defaults are wilful and fraudulent.

"What causes greater concern is that a major part of the Non-Productive Assets and frauds are in large-value accounts," Sinha asserted as top banking and financial institutions' heads listened in rapt attention.

Added to this was the "unduly slow and long process" by which such loans and advances are 'red-flagged', declared NPAs, wilful defaulters and finally as fraudulent by the banks, Sinha said at the 7th conference of CBI and Indian Banks Association on 'Combating Financial Crimes'.

"This whole process is so time consuming that it allows such large borrowers ample time to walk away with the funds. A large part of such funds move outside the country to tax havens through hawala and other unofficial channels," Sinha said.

Under such circumstances, coupled with "weak and diffused accountability mechanisms in banks and financial institutions", CBI investigations are grossly hampered and "no one seems accountable", the central agency's chief said.

"The message to the public is that the rich and powerful are able to avoid consequences of cheating and fraud, while the ordinary citizens are promptly booked. This undermines the faith of people in the rule of law, which has dangerous consequences in democracy," Sinha said.

Quoting statistics, he said the gross NPAs of public sector banks shot up from Rs.44,957 crore in 2009 to Rs.300,000 crore in 2015.

The level of gross NPAs as percentage of gross advances also went up by more than double from 2 percent to 4.36 percent, without taking into consideration huge amounts tied up in accounts under restructuring.

Frowning upon the "delays in identifying and reporting frauds" by banks, allowing borrowers to siphon off funds before investigations are initiated, monitoring end-use of funds, especially in large-value accounts, or diversion for non-sanctioned purposes, the CBI chief cited two glaring cases it is investigating.

He said the first was the Kingfisher case involving allegations of defrauding banks of nearly Rs.7,000 crore. The loans/advances were availed between 2004-2012, but the case was registered in July 2015 and despite the agency's repeated requests, the banks did not bother to file a complaint with the CBI.

"We had to register the case on our own initiative. Now one of the banks has declared it (Kingfisher) as a wilful defaulter. The undue delay in identifying and reporting such a fraud has jeopardised the cause of justice to the offenders benefit, giving them opportunity to divert funds and destroy evidence," Sinha said.

Referring to the second case involving the PACL Group which netted over Rs.51,000 crore of illegal deposits from nearly 5.5 crore investors, he said, "It needed the Supreme Court to step in to order investigations and later order return of money to the depositors under its supervision."

"Should not the regulator have suo motu stepped in proactively to protect the rights of the 5.5 crore ordinary depositors," Sinha asked.

Referring to the Bank of Baroda scam, he said the banking channels were used to commit various financial crimes.

Present on the occasion were Dena Bank Chairman Ashwani Kumar, who is also the IBA chairman, State Bank of India chairperson Arundhati Bhattacharya, also the deputy chairperson of IBA, CBI Additional Director Y.C. Modi, top CMDs of various banks, financial institutions and regulatory bodies.