Review bad loans above ₹50 cr, banks told

NEW DELHI: The finance ministry directed state-run banks to examine all bad loan accounts exceeding ₹50 crore for possible fraud, a fallout of the multi-billion dollar scam at Punjab National Bank (PNB) that went undetected for seven years.

It also gave a 15-day deadline to state-run banks to take pre-emptive action, identify and address operational and technological risks, and adopt best practices to tighten their systems.

The government also stressed the need for accountability of the top management of banks and directed them to detect frauds and wilful defaults as per the Reserve Bank of India (RBI) guidelines, and to refer the cases to the CBI.

While this could pose an operational challenge to state-owned banks, in the process the Union government has signalled a toughening of stance and a sense of urgency in containing any fallout from the ₹12,636 crore scam allegedly perpetrated by jeweller Nirav Modi on PNB.

These banks will be required to scrutinise a large number of accounts—no estimate was immediately available.

The gross non-performing assets (NPAs) of state run banks is estimated at nearly ₹8 trillion.

“Examining all NPA accounts of more than ₹50 crore maybe a bit unmanageable for banks and will add to the regulatory compliance cost. It would have been better if the threshold was higher,” said Deepak Bhawnani, chief executive of Alea Consulting.