FM instructs PSBs to anticipate business deceptions and deliberate defaults

Public sector banks (PSBs) were instructed by Union Finance Minister Nirmala Sitharaman on Saturday to implement sophisticated fraud detection and prevention systems in order to stop major corporate frauds, stop willful defaults, and shield individual customers from being taken advantage of by dishonest people.

The minister instructed PSBs and National Asset Reconstruction Company Ltd. (NARCL) to expedite the onboarding of stressed accounts by holding regular meetings and by taking all necessary steps for the asset reconstruction company to acquire stressed accounts for prompt resolution.

On Saturday, heads of public sector banks, senior representatives from the Department of Financial Services (DFS), banking secretary Vivek Joshi, state minister of finance Bhagwat Kishanrao Karad, and Sitharaman presided over a meeting in the capital to assess the performance of PSBs on a number of metrics.

The finance minister, who was deliberating on banking frauds, said that the problem presents a serious risk to the security of financial institutions as well as individual consumers. This might result in monetary losses and a decline in public confidence in the banking system. She gave the banks instructions to implement cutting-edge fraud prevention and detection systems and make sure that consumers get ongoing education about secure banking procedures.

She said that banks need to implement consumer education programs to guard against fraudulent calls, identify accounts as fraudulent quickly, and conduct an investigation afterward. She also suggested that banks focus more on recovering from accounts that have been declared fraudulent or deliberately defaulted and that they keep an eye on early warning signals to look for possible fraudulent activity.

In order to secure better legal results, FM asked for a performance evaluation of the counsel representing PSBs. FM recognized that the success of legal action against defaulters before courts and tribunals mostly depended on good representation by lawyers and attorneys aided by bank executives.

She encouraged the PSBs to implement responsible lending standards nationwide, stating that deliberate defaults not only put an undue burden on the bank’s financial stability but also impede the flow of credit throughout the economy. Sitharaman gave PSBs instructions to increase due diligence before loan disbursement, make sure big loan accounts are regularly monitored, and take prompt, comprehensive legal action in the event of such default.

She requested that banks take strong administrative measures against the cunning bank employees who permit fraud and deliberate defaults. Additionally, the topic of cyber security came up during the discussion, and FM examined how ready each bank was to handle cyber security threats. She emphasized how important it is to protect consumer data privacy. According to her, cyber security concerns should be viewed from a systemic standpoint as even a little weakness may be exploited by malicious actors to pose threats to the whole system.

The finance minister urged the banks to adjust to the changing digital landscape and make sure that the integrity of domestic financial systems is not jeopardized. She emphasized the need to adopt proactive cybersecurity measures and implement strict security protocols to protect sensitive financial information and systems from cyber-attacks.

Together with the aforementioned actions, Sitharaman emphasized the significance of deposit mobilization and pushed PSBs to come up with creative and alluring deposit plans in order to grow their deposit base, which would allow them to provide more credit.