Banks plan stiffer risk management system

Lenders see no further unauthorised LoUs issued except for PNB

New Delhi : Bankers on Thursday decided to put in place more robust and secure risk management mechanism within six months to check fraudulent activity by unscrupulous elements in the aftermath of the country’s largest bank fraud of Rs 12,968 crore allegedly perpetuated by Nirav Modi.

All public sector banks (PSBs) have verified LoUs issued by them, and there are no other unauthorised authority letters except for those issued by PNB, State Bank of India Deputy MD M S Sastry said.

It is important to note that the major incident that took place recently in one of the branches of a public sector banks is one-of-its-kind in about 5,000 branches, dealing in foreign exchange in the entire banking system in India, he said.

Addressing media after three-day deliberation, he said, banks will be putting up their action plan to respective boards and in three to six months action plan would be implemented by all the banks.

Action plans are drawn to further strengthen the controls in the areas of trade finance, SWIFT, credit risk, operational risk besides cyber and IT risk. Banks will now place these action plans with timelines for implementation and improvement before the respective boards, he said.

“Further controls have also now been put in place that includes additional layer of approval for all outward SWIFT messages, integration of SWIFT with CBS latest by April 30, 2018 besides time restrictions for such transactions i.e., between 9 am to 8 pm only,” Sastry said.

“All chief risk officers, executive directors and chief technology officers of the PSBs came together to review what are the best practices from risk management we have and also compiled a list of best practices so that individual banks can go back and review where there is room for improvement,” he said.

The meeting follows the finance ministry directives on February 27 to the state-owned banks to come out within 15 days a pre-emptive action and identify gaps/weakness to gear up for rising operation and technological risks.

PNB finds fresh Rs 9.9 cr fraud case

Mumbai : Punjab National Bank has uncovered another credit-guarantee fraud within the Mumbai branch at the center of a similar scam worth over $2 billion, according to a complaint with the police.

The alleged embezzlement of around Rs 9.9 crore involved executives of a company called Chandri Paper and Allied Products, according to PNB. The CBI booked ex-deputy general manager (DGM) of PNB Gokulnath Shetty and Manoj Hanumat Kharawat, both promoters of Chandri Papers in connection with the multi-crore scam.  Shetty has now been blamed for issuing two LoUs using the same modus operandi to Chandri Papers.

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