Why Has the Central Vigilance Commission Asked Public Sector Banks in India to Not Report Frauds Below Rs. 1 Lac?

The Central Vigilance Commission (CVC) in India has recently advised public sector banks to not report frauds involving amounts below Rs. 1 lakh. This decision, taken after careful consideration, aims to address the practical challenges faced by banks and financial institutions in reporting such cases to the police and other relevant authorities.

Context and Background

The decision was made following consultations between the CVC and the Reserve Bank of India (RBI). One of the primary reasons behind this advice is the significant delays often encountered in reporting such cases to the police. These delays not only impede the swift action by law enforcement agencies but also allow fraudsters to quickly move and conceal the ill-gotten funds before the investigation begins.

Practical Difficulties in Reporting

Another important factor is the difference in the interpretation of 'fraud' between banks/financial institutions and government agencies. This mismatch often leads to unnecessary complications and delays in the reporting process. The objective has been to streamline this process and ensure that minimal resources are wasted on minor cases.

Indicative Amounts and Decision Making

Specifically, the current RBI circular advises banks to report cases involving amounts above Rs. 1 lakh, with lesser amounts being monitored internally by bank officials. This threshold of Rs. 1 lac is a compromise that balances the need for prompt action with the efficiency of resource utilization. For frauds involving bank staff, cases are still to be reported to the police, ensuring that internal misconduct is addressed appropriately.

Handling Frauds Involving Outsiders

Frauds committed by outsiders or third parties, and cases involving amounts between Rs. 1 lakh and Rs. 2 crores, will be reported to the police for investigation and potential criminal action. This enables a more comprehensive and robust response to external fraudulent activities, ensuring that all aspects of the crime are addressed adequately.

Roles of Different Bodies

For larger bank frauds ranging from Rs. 2 crores to Rs. 7 crores, the Anti-Corruption Bureau of the Central Bureau of Investigation (CBI) and its Economic Offences Wing handle the cases. These specialized agencies are well-equipped to deal with such complex and significant financial crimes. For frauds exceeding Rs. 7 crores, which are classified as scams, the apex authority of the CBI manages the investigation.

Conclusion

The decision to not report fraudulent activities below Rs. 1 lac by public sector banks reflects a pragmatic and evidence-based approach. While aiming to reduce bureaucratic delays, it ensures that serious cases are openly addressed. This move is designed to streamline the fraud-reporting process and enhance the efficiency of law enforcement agencies, ultimately leading to better protection of public and bank funds.