Govt can use these laws to check banking scams, clamp down on economic offenders

The year 2018 rocked the banking sector, with scams like the Punjab National Bank fraud, which tarnished the image of the entire banking industry. The issues such as window dressing of corporate accounts to conceal non-performing assets allegedly by some private banks, including Yes Bank and Axis Bank, also left a dent, forcing the Reserve Bank of India (RBI) and the government to come up with measures to check such activities in banks.

In a written reply to a question in the Rajya Sabha, Shiv Pratap Shukla, Minister of State for Finance, said on Tuesday that the government has initiated the formulation of several laws to secure prudential banking and instil a culture of credit discipline.

Also read: RBI has a new tool to prevent bank frauds! It'll affect most companies

Here's a list of all the laws enacted by the government to check scams in banks.

• Insolvency and Bankruptcy Code (IBC): Insolvency and Bankruptcy Code, 2016 (IBC) has been enacted to create a unified framework for resolving insolvency and bankruptcy matters. IBC adopts a creditor-in-saddle approach, with the interim resolution professional taking over management of affairs of the corporate debtor at the outset. In the process, the wilful defaulters and persons associated with NPA accounts are debarred from the resolution process.

• The Banking Regulation Act: The Banking Regulation Act, 1949, has been amended to provide for authorisation to the Reserve Bank of India to issue directions to banks to initiate the insolvency resolution process under the IBC.
• The Fugitive Economic Offenders Act: The Fugitive Economic Offenders Act, 2018, has been enacted to deter economic offenders from evading the country. Under this law, the property of a fugitive economic offender is attached and confiscated. The law also allows disentitlement of the offender from defending any civil claim.
• The SARFAESI Act: The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI Act), has been amended to provide for three months' jail in case borrower does not provide asset details, and for lender getting the possession of the mortgaged property in 30 days. "Six new Debts Recovery Tribunals have been established and the minimum pecuniary limit for filing of cases in DRTs has been revised in 2018 from Rs 10 lakh to Rs 20 lakh to enable focus on higher value cases in these fast-track tribunals," a government statement said.

Edited by Manoj Sharma