State-run banks to start forensic audit of all ‘potential’ bad loans

Bank staff will sift through all available information of a borrower’s finances during forensic audit process, which could then be used as additional information in courts in cases of bankruptcy.

Once the audit is over, banks will be able to detect accounts that have the potential to become NPAs, banks will then send these reports to the central government and investigative agencies for further action, says an Indian Express report.

If any fraud is detected in these accounts, chief vigilance officers of banks will brief the matter to Central Bureau of Investigation (CBI). CBI will take over the matter.

“We are undertaking this challenging task of auditing all accounts above Rs50 crore. These are forensic audits being done in line with the Government’s initiative to detect frauds. For any account that is turning into NPA, we are seeking a borrower status report from the Central Economic Intelligence Bureau. This will help us identify whether the NPA is due to genuine business issues or some fraudulent activity,” the Indian Express quoted a top public sector bank official as saying.

“An across-the-board cleaning process is taking place in the (government) banks. Rs250 crore and above accounts are being monitoring closely for any violation of loan conditions. Rs50 crore and above accounts are being examined for wilful default and fraud. IBC (Insolvency and Bankruptcy Code) amendments are being moved. So the entire pain is front-loaded and the hope is that public sector banks will turn healthy in the near future,” the report quoted a finance ministry official as saying. “There will be write backs, as the ongoing resolution of large loan accounts across various benches of the National Company Law Tribunal is expected to help banks to recover a significant portion. The ordinance on economic offenders should also work as a deterrent,” the official added.