Kingfisher scam: Now banks, CBI team up to tackle frauds

NEW DELHI: Banks and the Central Bureau of Investigation (CBI) are coming together to form a permanent working group having representations from both banks and the investigation agency. Banks have also asked the CBI for direct access to the passport website in order to quickly verify the authenticity of documents. The working group will look at ways to tackle the growing menace of frauds in the banking system.

Banks and the CBI may also work together towards getting Vijay Mallya arrested and staking claim to the $75 million that Diageo has promised to pay him for walking away from United Spirits, according to bankers.

This comes a day after banks and the CBI were at loggerheads about the treatment of financial scam cases. While the CBI attempted to point fingers towards banks for not reporting the cases earlier, banks hit back saying that even reporting to the CBI hasn’t had any dramatic effect on the cases.

The Reserve Bank of India (RBI) and CBI are also jointly working on a portal where the regulator and the investigating agency will share data and information so that they can jointly act on the fraudulent cases. Bankers will also be trained in the CBI training centre at Ghaziabad so that they can tackle fraudulent cases with ease.

On Wednesday, top bankers from both public sector and private banks, officials from the stock market regulator Sebi and the RBI brainstormed with the CBI top brass on various issues that create hurdles for taking action against willful defaulters. Top executives from all public sector banks and private sector banks participated in the deliberation where bankers were divided into 11 groups to discuss and present their key points.

United Bank of India was one of the first banks to declare Kingfisher as a wilful defaulter. But the bank’s credit committee decision was quashed by the Calcutta High Court on technical grounds. The legal restrictions also stand in the way of getting justice in several cases. When recovery notices are sent to borrowers, they move the court to get a stay on the bank’s efforts, bankers told the CBI officials.

Even in the Kingfisher case, the banks so far have been able to auction only one property – the Kingfishe House in Mumbai. Mallya’s Goa villa is yet to be attached by banks because it is embroiled in legal issues. The only recovery was through the sale of the shares of United Spirits that were pledged with banks.

A senior banker who was part of the deliberations said that the chairman of a large public sector bank raised the issue of fear psychosis among bankers who are treated by investigating agencies as perpetrators of the fraud rather than being treated as victims.

Some foreign and private sector bankers raised the issue of cross border transactions where companies and promoters form special purpose vehicles (SPVs) to transfer money from domestic markets to overseas locations. The RBI representative also raised the issue of the SPV being the conduit for money leaving India and then lenders and investigating agencies loosing track of the money trail.

The CBI has assured the bankers that they need not fear to report cases to the investigating agency and that bankers would be given an impartial hearing.