IDBI Bank discloses Rs772-crore fraudulent transactions

IDBI Bank Ltd on Tuesday said five of its branches in Andhra Pradesh and Telangana have fraudulently issued loans worth Rs772 crore ($118.8 million), which continue to hammer its shares.

Some of the loans, which were issued during fiscal years 2009 to 2013 for fish farming businesses, were obtained against fake lease documents of non-existent fish ponds and by inflating the value of collateral, the bank said 
IDBI Bank also reported major lapses in processing and disbursing of loans by two of its officials. The lender said it has since dismissed one of the officials, while the other official had already retired.
The bank said the Central Bureau of Investigation (CBI) has registered cases against two of the five complaints, relating to branches at Basheerbagh and Guntur.
The bank said it has initiated a quality assurance audit (QAA) to further strengthen and enhance its internal audit function and align it with prevailing best practices.
For this purpose, the bank has appointed an external expert who was very much associated with the audit reforms in the PSBs.
The scope of QAA includes review of the internal audit framework pertaining to policies, processes, procedures, reporting structures, formats of the bank and integration thereof with risk based supervision.
It will also review of Branch Risk Rating Framework to ensure that various business risk assessment parameters, criticality, risk weightages and audit observations reflect the risk severity of the branches, in terms of business performance, adherence to the laid down procedures, regulatory compliances etc.