In order to nip potential frauds in the bud, Central Bank of India has decided to send flying squads on surprise inspections to fraud-prone areas and branches. Given that frauds are factored in by the Reserve Bank of India in its supervisory review and evaluation for assessing “residual operational risk” in general and “fraud risk” in particular, the bank wants to embrace the principle of ‘prevention is better than cure' to tackle prospective frauds.
The Mumbai-headquartered bank plans to engage retired officials of public sector banks and the RBI. These officials, who had served in the middle and senior management grades, would be appointed on a contractual basis.
The three-member flying squads, headed by a retired Assistant General Manager and comprising retired Senior Managers or Chief Managers, will be attached to the zonal offices in Lucknow, Muzaffarpur, Raipur, Chennai and Kolkata.
Mr Bharat Dave, Chief Vigilance Officer, Central Bank of India, said: “We expect the squads, among others, to analyse abnormal activities in customer accounts, be it those of depositors or borrowers, suggest remedial measures, and also ensure compliance with established systems and procedures.”
Mr Dave said the bank is trying to resolve fraud cases aggregating about Rs 500 crore.
These cases, including one involving a sum of Rs 130 crore in a Kolkata branch, have accumulated over the last few years. The flying squads are expected to carry out surprise inspections, especially in fraud-prone areas and branches, to verify that Maker-Checker concept in the branches is strictly adhered to, know-your-customer norms are followed and computer generated reports are regularly checked.
The flying squad will also be required to ensure that various certificates and reports are regularly submitted by the branches to their controlling offices and reports or certificates submitted by the branches to their controlling offices are correct.
RBI report
According to the RBI's Report on Trend and Progress of Banking in India, frauds were perpetrated to a large extent with the help of intermediaries and third-party service providers such as lawyers, valuers, chartered accountants, statutory auditors, real estate agents, real estate developers, builders, warehouse owners, motor vehicle dealers, agricultural equipment dealers and travel agents.
Based on the provisions of the Indian Penal Code, frauds are classified under various heads including misappropriation and criminal breach of trust; fraudulent encashment through forged instruments, manipulation of books of accounts or through fictitious accounts; unauthorised credit facilities extended for reward or for illegal gratification; negligence and cash shortages; cheating and forgery; and irregularities in foreign exchange transactions.
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