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Tuesday, May 26, 2020

Reserve Bank setting up exclusive wing for banking fraud oversight

The banking regulator is also planning to bring in experts from the private sector working in all these domains to train the new members in the fraud oversight wing. These training sessions are will be repeated every year in the initial years, the sources said.

Written by Aashish Aryan | Mumbai | Published: April 6, 2020 3:02:03 am
 Reserve Bank of India, RBI, banks bad loans, banking fraud oversight, banking fraud cases, india bank frauds The new team is likely to be formed as soon as within the next month, and could have a capacity of up to 600 officers, the sources said, adding that the perception of the RBI’s inaction in the Yes Bank case had sped up the process. (File Photo/Representational)

The Reserve Bank of India (RBI) is in the process of putting together an exclusive wing for banking fraud oversight, which will have teams for meta-data processing and analysis, artificial intelligence analysis units, as well as pro-active risk assessment cell, sources close to the development said.

The banking regulator is also planning to bring in experts from the private sector working in all these domains to train the new members in the fraud oversight wing. These training sessions are will be repeated every year in the initial years, the sources said.

The new team is likely to be formed as soon as within the next month, and could have a capacity of up to 600 officers, the sources said, adding that the perception of the RBI’s inaction in the Yes Bank case had sped up the process.

“There was one RBI director on the Yes Bank board, who had the help of three mid-level executives. They had never done credit risk assessment task in their career so far, so it was difficult for them to flag what was happening,” a source said, requesting anonymity.

Explained

Veterans to guide teams; training in latest technologies

The idea of a fraud oversight wing was floated in October 2019 by the top management of RBI. The working conditions, however, were very strict and anyone opting for that cadre would not be allowed to leave for three years. To overcome the problem, the RBI sought to create an entire new wing and hire fresh people, including industry veterans who would lead the teams. These new teams will also be given training in the latest technologies, so that they can also prevent another Yes Bank kind of event.

The RBI, on March 5, superseded the board of Yes Bank and placed it under immediate moratorium. Withdrawals from the bank were also capped at Rs 50,000. The banking regulator had then appointed former State Bank of India Chief Financial Officer Prashant Kumar as the bank’s administrator.

A day later, the RBI revealed a reconstruction plan for the private sector lender, which had then suggested a possibility of SBI, India’s largest bank, acquiring a 49 per cent equity stake. SBI later committed to invest up to Rs 7,250 crore in the beleaguered private sector lender.

After the loan fiasco at Punjab National Bank, the RBI had been mulling ways to pro-actively detect such frauds.

As part of that plan, the banking regulator had late last year moved to create a separate cadre of its own employees who would work in regulation and oversight sections.

There were some initial teething troubles due to which the section could never get to actual ground work, sources said.

Apart from the new division, the banking regulator is also likely to move swiftly to fill its vacancies, as it faces a shortage of staff.

“We found that in divisions or for work where we should have 20 people working on a case, there were only 7-8. Naturally they will be overworked all the time and the bank will face human resource management issues,” another official said.

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