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Citi effect: CVC may snoop more

india Updated: Jan 06, 2011 07:43 IST
Mahua Venkatesh

The Central Vigilance Commission (CVC) is likely to increase its snooping on public sector banks in the wake of the R300-crore fraud in Citibank’s Gurgaon branch and the housing loan scam involving LIC Housing Finance that came to light last month.

Both incidents have caused serious embarrassment to the country’s banking industry, which was largely congratulating itself on its prudence after it withstood the brunt of the global financial crisis.

Sources in state-owned banks said Central vigilance officers (CVOs) are likely to monitor high value bank transactions to ensure that incidents of fraud are reduced. Transactions involving more than R1 million are currently considered as high value.

The CVC could also seek reports pertaining to certain transactions. “The CVC and the CVOs are already monitoring the banking activities and with the recent spate of events, they would naturally be more agile,” the CMD of one bank said. Irregularities have occurred in banks despite fraud detecting systems being in place and need to be addressed, he said.

In the last five years as many 252 employees of 11 public sector banks have been involved in helping customers withdraw large sums of money through fictitious cheques. The Reserve Bank of India (RBI) has also taken note of the incidents and asked banks to fix staff accountability to prevent frauds.

“Banks should ensure that the reporting system is suitably streamlined so that frauds are reported without any delay. Banks must fix staff accountability in respect of delays in reporting fraud cases to RBI,” the central bank said in a circular last year. Banks have already begun setting up a robust real-time system of checks and balances and say there is a case for vigil but not worry.

“We have a well devised monitoring system and there is no cause for concern,” MD Mallya, chairman and managing director, Bank of Baroda, said.