Kingfisher fraud: CBI blames banks for not reporting cases on time

The Central Bureau of Investigation (CBI) director Anil Kumar Sinha came down heavily on the banks for not reporting fraud cases like Kingfisher on time. But bankers say that reporting to CBI has also not yielded dramatic results. Rather, bankers are often called to question on credit decision taken by their predecessors.

Sinha said at a seminar jointly organised by the CBI and the Indian Banks' Association, “Banks are failing to report fraud cases like Kingfisher and PACL on time and regulators should have taken cognizance of the financial frauds like PACL. The CBI recently registered a case of cheating and fraud against Kingfisher and its erstwhile management involving allegation of defrauding banks to the tune of Rs 7000 crore. This case was filed in July 2015, but the loans and advances were taken during 2004 to 2012. However, despite repeated request, the banks did not file a complain with the CBI.”

“We had to register the case on our own initiative. The question is that the undue delay in identifying and reporting such a fraud has jeopardized the cause of justice to the offenders, giving them opportunity to divert funds and destroy evidence. We must ponder over this issue,” Sinha added.

He pointed out that in the second case related to PACL Group, which has reportedly collected over Rs 51,000 crore of illegal deposits from nearly 5.5 crore investors, spread across nearly all states, the regulator should have taken cognizance of this. 

Bankers across the spectrum say that the CBI first trains its guns on the bankers before going after the defaulters who may be on the run. “Bankers become soft targets because I may be trying to recover a loan. The credit decisions may have been taken by my predecessors who may have long retired or moved to another bank,” said a banker requesting anonymity.

The CBI investigated 171 cases of bank frauds in the year 2015 involving funds of Rs 20,646 crore. In addition, the CBI is also investigating the Ponzi schemes involving funds of over Rs 1.20 trillion.

The CBI director, however, did not mention its record on tracking down the banking frauds handed over by the banks to the agency in the last few years. On the large bank defaults, he said, “Something is going wrong” without elaborating what exactly is amiss.

Bankers counter this by saying that lenders in the last two years have reported large corporate frauds to the tune of over Rs 20,000 crore to the Central Bureau of Investigation (CBI). Some of the cases are Biotar with an exposure of Rs 1,500 crore, Winsome Diamonds Rs 6,000 crore, Rei Agro with an exposure of Rs 6,057 crore. 

Banks are also in the process of handing over Praveen Kumar Tayal-promoted three companies Krishna Knitwear Technology Ltd, Jayabharat Textile and Real Estate Ltd, and Eskay Knit (India), which have a combined exposure of Rs 3000 crore, to the CBI. 

The CBI and Indian Banks Association(IBA) jointly organised a seminar in Mumbai to sensitise bankers on the need to report bank frauds with urgency. All top bankers both from the private and the public sector banks attended the event where the CBI and bankers are planning to chalk out a strategy to jointly act against the growing menace of frauds involving large accounts.

When a senior CBI officer was asked what is the success rate in closing financial frauds, he said, “We have made arrests in 67% of the cases, but these were for all cases under its ambit, not the financial cases. Some financial frauds could be among them.”

A senior banker said, “Kingfisher was such a high profile case where the banks were fighting case in High courts in Bangalore, Kolkata, Goa and Mumbai. When cases are reported to the CBI, often the first line of questioning is the bankers for the credit sanctions. If so much of scrutiny is put on credit proposals, no credit proposal would have been sanctioned by banks.”