Banks report over 100 home loan frauds in three months

BL:27 April 2012

Call it a double whammy for public sector banks. Housing loan frauds have crossed the 100-mark in just three months this year. To top it, the amount under write-off (including compromise) for all categories of loans has increased alarmingly.

The Government tabled two sets of data in the Lok Sabha on Friday indicating that banks need to pull up their socks to improve their working. There is apprehension that non-performing assets (NPAs) may increase when banks start announcing their financial results for 2011-12.

In a written answer on home loans, the Minister of State for Finance, Mr Namo Narain Meena, said the Reserve Bank of India had no specific information about home loan scams at any public sector bank. To curb incidents of frauds, the RBI had advised banks to introduce a system of concurrent audit, he said.

The Central Bank had also asked banks to review the working of internal inspection and audit machinery by the audit committee of the Board of Directors. Banks were also advised to constitute a special committee of the board exclusively to monitor frauds of Rs 1 crore and above.

However, a senior bank official said that lack of facility of online inspection of property documents besides other issues help fraudsters. Another senior bank official did not rule out connivance of bank staff and builders.

HEAVY WRITE-OFF

A set of data shows write-offs (including compromise) up from nearly Rs 7,000 crore (March 2009) to over Rs 17,000 crore at the end of March 2011. Banks resort to write-offs only after exhausting all other possible avenues for recovery or when the asset coverage is not enough, Mr Meena said.

According to RBI guidelines, banks should either make full provision or write off such advances and claim tax benefits.

While bankers claim that extra caution in due diligence is taken in all kind of loans, things become difficult when there is too much political pressure to write off or compromise.