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- October 2019
Index
Toppers Talk
Art & Culture
Polity
- Right to access internet is fundamental right declares Kerala High Court
- Legal rights of Deities in India, Difference in Natural and Juristic Person
- Bru refugees refuse to return to Mizoram
- No animal sacrifice in Tripura temple-Orders High Court
- EC’s Order on Reducing Sikkim CM’s Disqualification Period
- Law Ministry issues corrigendum to Jammu and Kashmir Reorganisation Act
- Appointment of the Judges in India.
- New Chief Justice of India- How is CJI appointed?
- Indian Penal Code 1860, HM Amit Shah wants to Overhaul IPC
- National Population Register (NPR) 2020
- Whistle Blowers Allegations on Infosys
Governance & Social Justice
- 60% girls in Delhi colleges anaemic
- Niti aayog’s School education quality index
- Multipurpose National Identity Card
- Population pyramid : India Vs China, Demographic dividend Phase of India
- UN Population Report, India will become the most populous country by 2027
- Supreme Court upholds SC and ST (Prevention of Atrocities) Amendments Act
- Comparing Population Pyramids of India and China
- Waqf boards-Their governance and purpose
- Harvard Admissions Case
- Pradhan Mantri Jan Arogya Yojana- Ist Anniversary, Problems and solutions
- Significance of sexual and Reproductive Health-Status of reproductive services in India
- Pregnancy in Old Age, What is In Vitro Fertilisation-Risks and legal shortcomings
- Supreme Court Judgement on NGOs and RTI
- Social Stock Exchange
- Rajasthan Govt changes EWS norms, Sets Rs 8 lakh family income as only criteria
- Global hunger index 2019
- No Government job for those with more than two kids
- Ranitidine CANCER risk
- IIT Council Introduces Tenure track system
International Relations
- Bangladesh growing faster than India ?
- Cyprus dispute explained
- Donald Trump impeachment
- India wins Hyderabad Nizam case against Pakistan
- India’s reply to Pakistan at UNGA
- Prime Minister of Malaysia calls India and invader in Kashmir
- Should India recognise the armenian genocide ?
- Why are CARICOM countries important for India ?
- Why are countries leaving OPEC ?
- Attacks on Saudi Oil facilities
- Organization of Islamic Cooperation issues statement on Jammu and Kashmir
- Sri Lanka’s relations with India & China
- US troops start pullout in Syria as Turkey prepares for operation
- What are Vanilla Islands?
- India-USA trade deal
- UNHCR Nansen Refugee Award-2019
- Modi – Xi Informal meet at Mamallapuram – Historic Chinese links
- India China informal summit in Tamil nadu
- Pakistan save from FATF blacklist till 2020
- USA blacklists China organisations over Uighur Muslim abuse
- Why is Chile burning ?
- Why is the Philippines important for India
- Xi jinping Nepal visit 2019 and impact on India
- India Pakistan Cross LOC Trade suspended, Should India revoke suspension?
- Protests in Lebanon
- Chennai to Vladivostok Sea Route
- End of baghdadi
- Indian government’s security advisory
- Indians no longer require Visa to visit Brazil
- Non Aligned Movement 2019 summit
- US backed Ceasefire between Turkey and Kurds
- Pakistan stops postal exchange with India
- China’s GDP growth slows to 6% slowest in 27 years
- Common Goods for Health project by WHO
- Turkey attack Kurds in Syria
Geography
Economy
- Behavioural Aspect of Farmer Suicide
- Is rural India really open defecation free ?
- Global Growth Slow Down
- Nobel Prize in Economics 2019
- Regional Comprehensive Economic Partnership
- SBI wrote off bad loans worth 76,000 crores
- Surge in Onion Price
- Agriculture Credit by RBI’s Internal Working Group
- What is Debt to GDP Ratio?
- Yes Bank Crisis
- Nobel prize in Literature – Controversy
- Boosting Indian Exports
- Sopore Fruit Mandi deserted
- What is Pink Collarisation?
- Mizoram to have Broad Gauge railway line by 2021
- Demand downturn in Indian Economy
- Payment facilitation fund
- Participatory Guarantee Scheme
- RBI’s 4th Bi-monthly Monetary Policy 2019-20
- Tourism restrictions lifted in Kashmir
- Link between Jobs, Farming, and Climate
- Draft Social Security Code 2019
- State Tax Revenues, SGST and Central Tax Devolution are likely to fall short
- Competitiveness Index 2019 by World Economic Forum
- NITI Aayog’s Water Resources Strategy
- BSNL and MTNL financial issues-DoT prepares Rs 74000 crore revival plan
- 20th Livestock Census
- India falls 10 ranks in World economic forum’s Global competitiveness index
- RBI stops Printing Rs 2000 Notes
- What is the Unified Approach proposal of OECD?
- FCI granaries overflowing
- India’s Economic Growth 2019
- Financial Sector Scams in India
- Labour Market of India
- New Strategic Disinvestment Process
- Payment Delays to Sugarcane Farmers
- Why India’s IMF Quota is not increased
- What is monetary policy Transmission? Why banks are not reducing interest
- Mahatma Gandhi’s theory of Economics
- India moves up 14 spots to 63 on world Bank ease of doing business index
- New amendments to the Motor Vehicles Act
- Power Sector Scenario in India
- Telecos to Pay Rs 96,642 crore to the Government
- Camel population declines in Rajasthan
- Merger of BSNL and MTNL
- World bank on Indian economy
Defence & Security
- Nagas Kukis Conflict, What is the cause of the latest tensions?
- Case against 50 Celebrities controversy
- Can Indian Government intercept WhatsApp?
- UP Government fires 25000 home guards, Is Yogi Government’s decision justified?
- NCRB’s Crime in India 2017 report
- Aadhaar Social Media mandatory linking case
- What is TechSagar? National repository of India’s cyber tech capabilities.
Disaster Management
Science & Technology
- ISRO’S Project NETRA
- Facebook’s LIBRA Currency in trouble
- WHO launches first World report on Vision
- 2019 Nobel prize in physics
- 2019 Nobel prize in Physiology and Medicine
- Elon musk’s starlink project
- NASA’s ICON mission
- New King of the Moons in the Solar system is Saturn
- What Is Spectroscopy ?
- Quantum supremacy
Environment
- Climate Vulnerable Mapping Of India
- C40 Cities
- Gujarat Unveils emission trading scheme
- Forest Plus 2.0
- Himalayan States seeks Green Bonus
- India to Phase Out Single Use Plastic (SUP) by 2022
- Role of Volcanoes in Global Warming
- NH 766 ban controversy, Protests in Kerala against night traffic ban on the forest stretch
- Climate Change needs Global Solution
- Aarey Forest -2185 trees to be cut for Mumbai metro
- Government to build 1400 km long Green wall
- Graded Response Action Plan in Delhi
- Aerosol formation brightening clouds
- Anthrax outbreak in Pobitora Wildlife Sanctuary, Two affected buffaloes died
- Species in News from June to October 2019
- Climate Action Summit 2019
Prelims bits

Tag:GS3|| Economy || Banking & Financial Sector || NPA
Why in news?
- Rs 71,500 crore worth of bank frauds detected in FY19: RBI latest report
- Indian banking system detected Rs 71,500 crore worth of frauds in the financial year 2018-19 which to put in scale is slightly more than the Rs 71,000 crore recapitalization package planned by the government to revive the health of its public-sector banks.
About the report:
- The Reserve Bank of India (RBI), in its latest annual report, has indicated that the rate of growth of frauds maybe not substantial but the amount involved in frauds has gone up by a whopping 73.8 percent.
- RBI data shows that in FY19, the banking sector reported 6,801 frauds involving a total Rs 71,542.93 crore as against 5,916 cases involving Rs 41,167.04 crore reported in 2017-18.
- As compared to this, state-run banks reported 3,766 cases of frauds worth Rs 64,509.43 crore as against 2,885 cases involving Rs 38,260.8 crore.
The challenge to financial regulation:
- The response of RBI:
- Two external directors questioned the apex bank as to how a series of scams that came to light since 2018 remained unnoticed.
- The two directors cited the Punjab National Bank (PNB) fraud, the IL&FS scam, and the very recent Punjab & Maharashtra Co-operative (PMC) Bank
- The external directors raising the issue come at a time when the RBI is facing a lot of flak over its inspection and oversight mechanism efficiency.
- Case of PNB Bank:
- Some officials took advantage of loopholes in the system to keep the RBI in dark regarding a substantial share of their exposures.
- In the PNB episode, the bank’s exposure to Nirav Modi escaped regulatory check as its SWIFT system (global financial messaging service) was not embedded into the bank’s core banking system (CBS).
- Many PNB officials had manipulated the SWIFT networkto issue unauthorized letters of undertaking (LoUs) to secure overseas financing.
- IL&FS crisis: The role of auditors has also come into question after the fall of IL&FS a year ago. Despite the apex bank flagging the inter-group exposure in IL&FS Financial Services, the NBFC kept evergreening loans, maintained credit rating and continued taking loans.
- PMC Bank: The PMC Bank scam came to light last month when it was discovered that the bank created over 21,000 fictitious accounts, some in the names of dead people, to hide bad loans extended to almost-bankrupt Housing Development and Infrastructure Limited (HDIL). According to its former MD Joy Thomas, the lender has an exposure of Rs 6,500 crore to HDIL.
Dual control:
- Although there is dual control over the supervision of the bank in cooperative banks by state and RBI. Dual control also poses a limitation on the supervising of the board of directors or removing the board of directors.
- But, PMC Bank used a “middle server” to manipulate data and convert the information in the bank’s core banking system (CBS) to hide information. “The data engagement between the RBI and cooperative banks is much less compared with scheduled commercial banks.
Large concerns:
- RBI report: the fund flow from the financial sector to the commercial sector decreased by 88%. Its impact can be seen on small traders, farming sector, unorganized sector lower strata.
- The stress faced by Yes Bank also figured in the course of the discussions.
- The central bank’s report says that the macroeconomic environment in the country remains unsettled and financial markets are experiencing considerable flux as the financial year 2019-20 progresses.
Steps taken by RBI:
- The RBI, in the report, said that they also subjected 57 banks through IT examination to check their cybersecurity preparedness and compliances.
- Targeted thematic examinations were also carried out, focusing on applications, infrastructure, and systems used by the bank.
- Central Fraud Registry (CFR), based on Fraud Monitoring Returns filed by banks and select financial institutions, has been set up by RBI as a searchable online central database for use by banks.
Measures being taken to Control and Prevent Frauds in Banks:
- Government has issued “Framework for timely detection, reporting, investigation, etc. relating to large value bank frauds” to Public Sector Banks (PSBs), which provides that
- All accounts exceeding Rs. 50 crore, if classified as Non-Performing Assets be examined by banks from the angle of possible fraud, and a report placed before the bank’s Committee for Review of NPAs on the findings of this investigation.
- Examination be initiated for wilful default immediately upon reporting fraud to RBI; and
- A report on the borrower is sought from the Central Economic Intelligence Bureau in case an account turns NPA.
- Fugitive Economic Offenders Act, 2018 has been enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. It provides for attachment of property of a fugitive economic offender, confiscation of such offender’s property and disentitlement of the offender from defending any civil claim.
- For enforcement of auditing standards and ensuring the quality of audits Government has initiated the establishment of the National Financial Reporting Authority as an independent regulator.
Way forward:
- Recently the government had formed a panel to suggest legislative changes to ensure better governance at co-operative banks and provide more power to the regulator.
- The RBI central board also formed a strategy sub-committee of the Central Board of Directors.
- Legislative Changes: The government should also take certain initiatives that will complement RBI and by providing more power to RBI over commercial and cooperative banks.
- Greater Regulatory Role Over Cooperative Banks: The biggest hurdle for cooperative bank management is dual control. So, there is a need for a proper legislature with regard to cooperative banks so that all power lies with the RBI. Then RBI will be able to implement better decisions with regards to Cooperative Banks.
- Efficient Players: With regarding the problems of financial inclusions, there is also a need for efficient players like cooperative banks, small finance banks, and payments banks, Currently, the government is focusing on creating international players by merging public sector banks but there is also a need for efficient players for providing financial services to farmers and lower strata of society.
Conclusion:
Both the RBI and the government have to play a supervisory role to prevent fraud in the future.
References:
- https://pib.gov.in/newsite/PrintRelease.aspx?relid=186411
- https://www.indiatoday.in/business/story/rbi-report-economic-situation-grim-banking-fraud-amount-rises-1593248-2019-08-29
- https://www.businesstoday.in/sectors/banks/rbi-central-board-discusses-regulatory-architecture-of-co-operative-banks-nbfc/story/384201.html