RBI asks banks to pull the plug on multiple banking fraud

In certain cases the borrowers used the accounts maintained at other financing banks to siphon off funds fraudulently diverted from the bank on which the fraud was perpetrated. This could be possible due to lack of a formal arrangement for exchange of information among various lending banks, the RBI said.

In some of the fraud cases,it was revealed at a later stage that the securities offered by the borrowers to different banks were the same. The defrauding has been going on despite the advice of the RBIs Department of Banking Operations and Development to banks last year to strengthen the sharing of information about the status of borrowers.

The DBOD circular prescribed a system of obtaining declaration from borrowers,exchange of information among banks on regular intervals and obtaining regular certification by a professional regarding compliance of various statutory prescriptions. Banks which have financed a borrower under multiple banking arrangement are also required to exchange information on multilateral basis regarding incidents of fraud,legal actions taken and covert activities or operations of the borrower after the fraud.