FM Directs PSBs To Pre-Empt Corporate Frauds And Wilful Defaults
Union finance minister Nirmala Sitharaman on Saturday directed public sector banks (PSBs) to adopt advanced fraud detection and prevention mechanisms to prevent large corporate frauds, check wilful defaults and protect individual customers from being duped by unscrupulous elements.
The minister asked PSBs and National Asset Reconstruction Company Ltd (NARCL) to take all necessary measures for the acquisition of stressed accounts by the asset reconstruction company for expeditious resolution and advised them to hold regular meetings to expedite the onboarding of stressed accounts.
Sitharaman was chairing a meeting to review the performance of PSBs on various parameters in the capital on Saturday, which was also attended by minister of state for finance Bhagwat Kishanrao Karad, banking secretary Vivek Joshi, heads of public sector banks and senior officials of the Department of Financial Services (DFS).
Deliberating on banking frauds, the finance minister said the menace poses a critical threat to the security of both individual customers and financial institutions, which could lead to financial losses and reduced public trust in the banking system. She instructed the banks to adopt advanced fraud prevention and detection mechanisms and ensure that the customers are further educated about safe banking practices.
Banks must undertake consumer education measures for protection from malicious fraud calls and to make efforts for timely identification of accounts as fraud and their subsequent investigation, she said and advised banks to put more effort into recovery from accounts declared as fraud and wilful default and asked them to monitor the early warning signals to check potential frauds.
Recognising that the effectiveness of legal action against defaulters before courts and tribunals largely depends on effective representation by lawyers and attorneys assisted by bank officials, FM called for a performance review of counsel representing PSBs to ensure better legal outcomes.
She said willful defaults not only strain the banks’ financial health but also hamper the flow of credit in the economy and urged the PSBs to adopt responsible lending practices across the board. Sitharaman instructed PSBs to enhance due diligence before loan disbursement, ensure regular monitoring of large loan accounts, and undertake swift and thorough legal action in cases of such default.
She asked banks to take strict administrative action against the conniving officials of the banks who enable fraud and wilful defaults. Besides, the issue of cyber security was also raised in the meeting and FM reviewed the preparedness of all banks in addressing cyber security risks. She stressed the need to ensure the privacy of customer data. Issues of cyber security should be seen from a system perspective as a small vulnerability can be used by nefarious elements to create system-wide risks, she said.
The finance minister emphasised the need to adopt proactive cybersecurity measures and implement stringent security protocols to protect sensitive financial information and systems from cyber-attacks and exhorted the banks to adapt to the evolving digital landscape, ensuring that the integrity of domestic financial systems remain uncompromised.
In addition to the above measures, Sitharaman emphasised the importance of mobilising deposits, urging PSBs to innovate and offer attractive deposit schemes to enhance their deposit base, which will also enable them to extend more credit.