E-Paper
Use technology to prevent diversion of funds, CVC tells banks
The apex vigilance body believes that a large number of high-value frauds take place because banks fail to monitor the usage of loaned money
The Central Vigilance Commission (CVC) has asked banks to use technology, especially artificial intelligence (AI), to create profiles and understand the lifestyles of their borrower customers so that any diversion of funds can be identified at an advanced stage in the future, people familiar with the matter said.
The apex vigilance body believes that a large number of high-value frauds take place not only due to disregard of systems and procedures in lending but also because banks fail to monitor the usage of loaned money.
“The banks have been asked to take advantage of AI to track the usage so that a red flag is raised where there is any abnormality in the operation of the loan account, and money is being diverted. A thorough analysis is required particularly in those cases where large transfers are reported in overseas branches,” said an officer, requesting anonymity.
Investigations into high-value frauds reported in the past five-six years have found that accused persons splurged on purchasing bungalows, jets, helicopters, yachts, jewellery, high-end cars and properties abroad using the public money, which was otherwise supposed to be used for the business activity mentioned while taking loans.
Vijay Mallya owned a luxury private jet, yachts including one of the largest in the world, a villa in Goa, where he reportedly organised parties, apart from several prime properties in the UK, France and the US, while banks kept on waiting for him to return the money. He owes ₹9,000 crore to Indian banks.
Similarly, Nirav Modi used the bank money in properties such as a sea-facing apartment in Worli, a Rolls Royce worth ₹5 crore, art collecting worth several dozen crores, flat in New York, and other countries apart from high-profile launch parties for his brand. Mehul Choksi too diverted his money abroad in the US and Antigua and Barbuda, where he currently resides as a citizen. Nirav Modi and Choksi and are accused of cheating Punjab National Bank of ₹13,578 crore.
Banks failed to monitor and analyse these activities, which could help in alerting about fraud at an early stage, said a second officer.
Among the problems noticed by the CVC in handling/approval of loans is same officers are made members of different finance/sanctioning committees.
“Another glaring issue noticed by CVC is the considerable delay in declaration of frauds by various banks in cases of consortium/multiple financing, which not only enables the borrower to defraud the banking system to a large extent but also allows him considerable time to erase the money trail,” said the first official cited above.
CVC has advised the banks “to give priority for the prevention of frauds at every level through the use of technology and discreet inquiries.
It has asked them to continue loan recovery efforts even after lodging complaints with the Central Bureau of Investigation and other agencies.
“It was also advised that the Internal Advisory Committee of the banks should consider the role and responsibility of each official while categorising the matter as vigilance and non-vigilance,” said the first official.
CVC has asked the probe agencies to improve the quality of investigation by providing adequate training to the investigating officers.
