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Disregard of systems, procedures behind large number of high value bank frauds: CVC

08:07 PM Sep 15, 2021 | PTI

A large number of high value bank frauds took place due to disregard of systems and procedures in lending as well as in general operation, the Central Vigilance Commission (CVC) has observed.

In view of this, the commission has advised chief vigilance officers (CVOs), who act as its distant arm to check corruption, to give priority to the prevention of fraud at every level through the use of technology and discreet inquiries.

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It also noted that big frauds reported from overseas branches necessitate a thorough analysis of the nature of issues involved therein.

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The matter came up during a sectoral review meeting of the banking sector held with the chairman and managing directors (CMDs) and the CVOs of the State Bank of India, Bank of India, Bank of Baroda, Central Bank of India, IDBI Bank, Union Bank of India, Bank of Maharashtra, United Bank of India, Allahabad Bank, UCO Bank, Bank of India, Punjab National Bank and the Reserve Bank of India (RBI).

The CMDs and the CVOs of the banks made presentations to the commission, bringing out the status of vigilance cases, progress made in them, preventive vigilance measures undertaken by the banks, initiatives taken to strengthen the whistle-blower mechanism, activities undertaken during observance of vigilance awareness week and the use of technology in the banking operation among others, the CVC said.

"Commission observed that a large number of high value frauds took place due to disregard of systems and procedures in lending as well as in general operation. Commission also noted that big frauds reported from overseas branches necessitates thorough analysis of the nature of issues involved therein," it said in its annual report 2020.

The commission has also observed that in the committee approach for financing, the same officer is made member in different committees, it said.

"Therefore, the commission advised CVOs to give priority for prevention of frauds at every level through the use of technology and discreet inquiries," said the report which was made public recently.

The CVC has noted that the quality of investigation needs to be improved by providing adequate training to investigating officials.

"Commission also advised that after lodging complaints with CBI and other agencies, the banks must continue recovery efforts," it said.

It was advised that the internal advisory committees of the banks should consider the role and responsibility of each official while categorising the matter as vigilance and non-vigilance, the report stated.

"Commission also mentioned that all banks must use technology, especially artificial intelligence to make a profile of their borrower customers, their lifestyle etc so that one can identify in advance the possible diversion of the amount lent," it said, highlighting the deliberation during the sectoral review meetings.

The commission holds annual sectoral review meetings with the CVOs of each sector.

In these meetings, the CVC takes appraisal of the targets achieved and sets the tone for the following year after extensive consultations with the CVOs. These meetings also provide the CVOs with the opportunity to seek the commission's guidance on various matters related to vigilance administration.

During the year 2020, the commission held 13 sectoral review meetings in which 76 departments or organisations had participated.

The meetings covered ministries and departments such as Home Affairs, Railways, Housing and Urban Affairs, Shipping, Road Transport and Highways, CBDT, CBIC, public sector banks, and insurance companies.

The CVC, in its sectoral meeting for the banking sector, has also emphasised on the importance of a robust whistle-blower mechanism.

"The importance of initial and mid-career training at all levels was also emphasised upon. In this regard, commission advised the banks to examine the feasibility of deputing the officials for a few days training in rural self employment training institutes and sending them for visits in rural areas," the report said.

The commission also advised the banks to ensure that there is a laid down policy for weeding out records which are not required at later stages.

"Commission advised that considering the sizable number of women employees in bank, at least one lady member should be nominated in each of the committees so as to give adequate representation to women employees," it said.

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