India: Govt. tells bankers to check NPA frauds or be held guilty

August 31, 2018

Insolvency and Bankruptcy of India


The Indian banking sector is being faced by the challenges posed by the non-performing assets (hereinafter referred to as “NPA”) which are the loans or advances for which the payment remains outstanding. The mounting number of NPAs reaching to a value as high as INR 8,00,000 Crore is raising great concern for the Government which is strategizing appropriate devices to tackle this situation.

Latest approach

The newest devised formula to deal with the problem of increasing NPA, the Government issued a stern warning against the banking heads- Chief Executive Officers to be alert and agile while checking for fraud in case of all the NPA accounts exceeding INR 50 Crore. In the event of failure to exercise caution as stated above, such officers shall face charges of criminal conspiracy under Section 120B of the Indian Penal Code, 1860. The Bankers would be held liable in case they are unable to report the fraud being committed requiring them to be extra cautious in respect of suspicious transactions involving diversion of funds which are later discovered by the investing agencies.

Criminal Charges

According to the provisions of Section 120B of the Indian Penal Code, 1860, whoever is a party to a criminal conspiracy shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.


The Reserve Bank of India had identified 12 stressed accounts in June 2017, each having more than INR 5,000 crore of outstanding loans and amounting for 25% of total NPAs of banks, for immediate referral under the Insolvency and Bankruptcy Code. With a view to reduce the NPAs in the banking sector, the Government has also imposed the liability of criminal charges on the bankers as a precautionary measure to ensure that they report any doubtful account handling which come under the scanner of the investing agencies.

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