Supreme Court ruling on e-records is a timely reminder for banks -Hindu Business Line-22.11.2014
ByThiruvananthapuram, November 21:
Banks will ignore at their own peril a Supreme Court ruling that electronic records without proper safeguards are non-admissible as evidence.
Computer outputs (printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer) are “secondary”, the court said. These are susceptible to tampering, alteration, transposition and excision and a whole trial based on them could lead to a travesty of justice, it observed in a concurrent order on Civil Case No 4226 of 2012. Failings in the banking sector on this count are best reflected in the CAG findings pertaining to the farm loan waiver scheme of 2008.
Of the 9,334 cases taken for scrutiny, 2,824 records were found to have been tampered with, overwritten or altered.
Responding to an RTI query, the RBI told S Dheenadhayalan, an activist, that it had advised banks to identify key risks that threaten computerised banking operations.
Banks must develop or design adequate internal control policies and procedures to mitigate risks, the RBI had said in a circular way back in February 1998. All transactions must be entered and accepted “once and only once, data accurately entered, standing data changes authorised and accurately entered.”
Sufficient audit trails, it said, must be maintained and placed with security procedures so that they cannot be altered.
But not many banks, including those in the public sector, seem to have gone the distance to ensure compliance. For instance, Indian Bank, according to Dheenadhayalan, admitted under the RTI that at least one of its branches was in possession of a standalone computer. In March 2010, the bank told Deepak Flexo Packs of Virudunagar, Tamil Nadu, that it had revised the waiver claim on its account from ₹32.53 lakh to ₹5.84 lakh.
Related data on how it arrived at the figure could not be retrieved since the system had crashed, he said. Pressed further, the bank merely said it was an isolated incident because it had occurred in a standalone computer.
As for policy of providing standalone computers at branches, there existed none. In some cases, standalones were provided for training staff. Some banks use them for routine administrative work which need not be connected to or fall under electronic data processing (EDP).
Standalone does not imply parallel tracking of factual reports. These computers could be used to generate convenient statement of claims, according to Dheenadhayalan.
In another case, Punjab National Bank made an inadvertent error in notifying claims while invoking the Sarfaesi Act on Raju Industries, Bangalore. A corrigendum issued by the bank in June 2010, said the figure of ₹33.92 lakh quoted in the possession notice was a mistake, and it must be read as ₹12.60 lakh.
Vigilance Commission alert
The Central Vigilance Commission (CVC) was forced to take note of frauds perpetrated on banks using passwords of other employees.
The CVC observed in a circular dated November 30, 2010, that bank employees in certain cases were not maintaining secrecy of their passwords.
“Instances are still coming to our notice where frauds of large amount have been committed by misusing the passwords of employees,” it noted. It should be ensured that all employees maintain secrecy of their passwords and keep changing them as frequently as possible, the circular said, adding that banks may evolve systems and procedures to ensure the same.
Instances of casual approach by any password holder should be dealt with ruthlessly by the bank concerned as the same may put huge amounts of funds at risk, the CVC noted.
Chief Vigilance Officers, it said, may take suitable action and regularly monitor the secrecy of passwords and apprise the Commission of action taken. They should report compliance in the matter by including this aspect in monthly reports being submitted to the Commission.
Loan recast hides stress in banks
Times of India 22.11.2014
NEW DELHI: Banks seem to have undertaken massive restructuring exercise in recent months, which has helped them show lower bad debt.
Data collated by the finance ministry for a meeting of bank chiefs on Thursday reveals that in case of at least five state-run lenders, the ratio of assets which have turned non-performing or have been restructured is as high as one-fifth of their loan book.
By restructuring debt — through conversion into equity, extension of repayment period and other changes —banks have managed to ensure that these loans don't turn sticky. For instance, in case of Dabhol Power, banks have converted a part of their loans into equity and deferred immediate provisioning to report healthier finances although the company is not earning any revenue and therefore unable to pay installments.
Data collated by the finance ministry for a meeting of bank chiefs on Thursday reveals that in case of at least five state-run lenders, the ratio of assets which have turned non-performing or have been restructured is as high as one-fifth of their loan book.
By restructuring debt — through conversion into equity, extension of repayment period and other changes —banks have managed to ensure that these loans don't turn sticky. For instance, in case of Dabhol Power, banks have converted a part of their loans into equity and deferred immediate provisioning to report healthier finances although the company is not earning any revenue and therefore unable to pay installments.
So, Central Bank of India's gross NPA level may be 6.25% at the end of September, but if you look at the ratio of restructured loans and NPAs, it adds up to close to 20.5%. For the entire public sector banking segment the level is around 12.6%, when gross NPAs are 5.3% of the loan portfolio.
The prolonged economic slowdown has resulted in companies facing earning pressure, resulting in loan defaults. Among the various sectors, SMEs are at the top of the heap with 7.2% of the loans turning NPA, followed by large corporates at 5.55%. Despite the perceived stress, real estate is performing better with 1.8% of the loans turning sticky.
At 14.2% of the loans, the highest level of NPA is in the gems and jewellery space, where export demand has been hit by the slowdown in the US and Europe. Then come coal, a sector which is in the grip of controversy, and cement, which has been hit by excess capacity.
The prolonged economic slowdown has resulted in companies facing earning pressure, resulting in loan defaults. Among the various sectors, SMEs are at the top of the heap with 7.2% of the loans turning NPA, followed by large corporates at 5.55%. Despite the perceived stress, real estate is performing better with 1.8% of the loans turning sticky.
At 14.2% of the loans, the highest level of NPA is in the gems and jewellery space, where export demand has been hit by the slowdown in the US and Europe. Then come coal, a sector which is in the grip of controversy, and cement, which has been hit by excess capacity.
Saradha scam: Major embarrassment for Mamata as CBI arrests TMC MP Srinjoy Bose-IBN
The ED has frozen five bank accounts of Bose, of which three are personal and two are that of the company's. It has also begun the process of attaching Samvad Pratidin, the Bengali daily owned by Srinjoy Bose.
The CBI has also summoned TMC MP Hasaan Ahmed Imran for questioning in the case.
Under fire, the TMC has called CBI "political manipulated". Speaking to CNN-IBN, party MP Sougata Roy lashed out at the CBI as he said, "Srinjoy Bose's arrest is unfortunate, CBI is politically manipulated. TMC as a party remains strong."
Party chief Mamata Banerjee has demanded the arrest of the guilty. She said, "Why is the CBI not catching the real culprits of the Saradha scam? They should arrest those who are actually responsible of cheating poor people."
Another party MP Derek O' Brien tweeted, "The CBI is a political tool used by the previous government to settle political scores. Now the BJP is doing an action replay. They cannot combat the Trinamool politically. They have tried and failed. So what do they do? Let loose a discredited CBI."
The ED has also frozen two bank accounts held by painter Shubhaprasanna, a close aide of CM Mamata Banerjee. It has also frozen as many as 24 fixed deposits held by the painter. His possible involvement in the scam is under the scanner of the central probe agencies.
Bose's arrest comes on a day when another Trinamool leader Shyama Prasad Mukherjee was grilled by the CBI. West Bengal Transport Minister Madan Mitra was also asked to turn up for questioning but he didn't and checked himself into a Kolkata hospital.
Former Trinamool Congress MP Kunal Ghosh, one of the prime accused in the scam, attempted suicide in the Presidency prison in Kolkata last week demanding the arrest of the guilty.
Seven high profile arrests have been made in the case as of now. It includes Sudipta Sen, Debjani Mukherjee, ex-TMC MP Kunal Ghosh, ex-DGP,West Bengal, Rajat Majumdar, East Bengal Club official Debabrata Sarkar, Sadanand Gogoi who is a singer from Assam and businessman Sajjan Agarwal, other than Srinjoy Bose.
Mamata Banerjee had earlier in the month claimed that nobody from her party had taken money from chit fund-aided companies, and hit out at a section of the media for showing Trinamool leaders as "thieves".
http://ibnlive.in.com/news/saradha-scam-major-embarrassment-for-mamata-as-cbi-arrests-tmc-mp-srinjoy-bose/514077-37-64.html
