The finance ministry is in containment mode after the PNB financial institution fraud rattled the kingdom. It is taking a slew of measures to control the damage and prevent the repeat of the sort of fraud.
The Department of Financial Services (DFS) has written to all banks with a fresh set of guidelines. Now, for all loans above Rs 250 crore, banks had been advised to rent a unique organization or representative to display the fame of the loan.
Apart from that, the Joint Lending Forums or consortium of banks had been told to restrict their length to ten in line with the scent of the whole exposure of the lender. The DFS hopes to lessen the whole range of banks to about 7 in the consortium.
Earlier consortiums of banks changed into allowed to be as massive as 20 with every financial institution gambling against each other.
“The modus operandi become to open an account in a small financial institution, form a consortium and then take a loan from a big bank that becomes a part of the consortium. The mortgage would be monitored by using the small financial institution as a substitute then the bank which had the best stakes. This turned into just one practice that turned into being followed until now. And we’re seeking to put an ease to this,” said Finance Ministry officers.
“Banks should now compulsorily proportion records with each other about borrowers and status of the loan. It is those small loopholes which might be ensuing in those huge frauds,” they added.
Another step taken is set situations that need to be met before the loan is sanctioned. For example, the first installment could be given to the borrower situation to the popularity of situations that are referred to in the settlement.
Sources knowledgeable that currently, a loan is sanctioned in full even before ok clearances are received for the project.
As a right away step, the Department of Financial Services has written to the 4 banks in Hong Kong thru which Modi leveraged the Letters of Understanding and Letters of Credit. They have been told to reconcile the losses and document returned.
Meanwhile, the All India Banks Association (AIBA) has hit out on the RBI, the Finance Ministry and even the Chief Vigilance Commissioner for his or her failure to analyze motives that end in such scams.
“When customers credit score is to be had for importers why does RBI introduce Letter of Undertaking which isn’t always in fashion among foreign banks? What turned into the want for RBI to encourage imports by assisting the borrower to get cheaper credit overseas rather than helping Indian Banks to increase their credits which could give higher taxes for the united states of America?” asked AIBA General Secretary D T Franco
Franco also criticised the loopholes in the SWIFT machine which turned into misused inside the PNB rip-off.
“It is a well-known truth that SWIFT has been used for frauds from the nineties and there are many said hacks of SWIFT. Why are the RBI and the authorities no longer intervening to correct the device?” requested Franco.
Banking professional Ajay Agnihotri says there are several checks and balances which have been forgotten over time.
“For instance, we need to bring lower back Financial Institutions Nominees on Borrowing Companies Board. Independent Directors are neither Responsible nor responsible. Secondly, info of monetary dealings of corporations has to be a part of annual bills. Names of sundry debtors, creditors, loans, and advances etc. Must be a part of the money owed. Abridged stability sheets had been pleasant after they have been revealed. Now in the digital generation, what is preventing them from full disclosure?” asked Agnihotri.
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New home loan possibilities
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