Banks Have Prepared a List of 3000 Businesses That Are Perpetrators of Fraud

Nitin Konde, Apoorva Bajj

Sep 7, 2024 — 2 min read

Banks Have Prepared a List of 3000 Businesses That Are Perpetrators of Fraud

According to sources familiar with the matter, banks have compiled a comprehensive list of over 3,000 companies implicated in fraud, which they intend to share and update in real time in response to an upsurge in financial scams. Legal professionals, construction workers, and gold loan evaluators are among those on the list of those who allegedly conspired to get loans using deceitful ways.

A senior bank executive informed the media that the matter was discussed at a meeting last month with the Advisory Board for Banking and Financial Frauds (ABFF). The decision was made to require lenders to check this list before doing business with such entities, and it will be updated in real time.

Adhering to RBI Guidelines

As banks keep sticking to the most recent fraud classification criteria that was announced by the Reserve Bank of India (RBI) on July 15, the list may contain additional items. Furthermore, at a discussion with the ABBFF, it was brought to the attention of the group that the operational staff does not always monitor the 'caution list,' which may make it possible for fraudulent entities to potentially re-enter the financial system.

One of the bank officials mentioned that to guarantee complete compliance, the banks will be issuing internal directions.

Even though banks typically take separate actions against fraudulent companies, these entities frequently find ways to interact with other regulated entities (REs). It is easier for lenders to verify and avoid dealing with organizations that have been reported for banking fraud thanks to the consolidated list.

Instruction by the Central Vigilance Commission

All public sector banks (PSBs), public sector insurance firms, and public sector financial institutions have been given instructions by the Central Vigilance Commission (CVC) to send any cases of fraud that involve more than INR 3 crore to the All India Bank for Financial Facilitation (ABFF) for advice.

The board has also been given the authority to conduct periodic fraud analysis in the financial system and to provide suggestions, if any, to the Reserve Bank of India and the Central Values Commission (CVC) for the formation of policy.

The list may be revised because banks will soon be finishing their internal exercise, according to one of the executives associated with the bank. There is a possibility that the new list will include other businesses such as valuers, chartered accountants, and business correspondents.

It has been found that fraudulent entities frequently manage to engage with other regulated entities (REs), even though banks normally take individual action against fraudulent organizations. The consolidated list gives lenders the ability to verify organizations that have been identified for financial fraud and to avoid associating with those organizations.