S S Tarapore, stepped down on Saturday as the chairman of the Advisory Board for Banking Commercial & Financial Frauds. The board, which is being reconstituted, will have S P Talwar, another ex-Reserve of Bank of India (RBI) deputy governor, at the helm.
During his four-year tenure (between March 1, 1997, and June 30, 2001), Tarapore has seen two rebirths of the board. From a part of RBI, it became a Central Bureau of Investigation (CBI) wing in 1999 and subsequently last year it expanded its ambit to cover financial institutions as well as other public sector undertakings.
During his tenure, the board has dealt with about 50 cases but Tarapore refuses to discuss any individual case. He is also not willing to say what happened to those cases. "Our job is to tell CBI whether a case is worth investigating or not. Beyond this, we don't go. About 50 per cent of the cases handled were worth investigating. But we never wanted to know what CBI has done with them," Tarapore said.
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Are financial frauds an aberration or part and parcel of the Indian banking system?
Given the size of the Indian banking system it would only be appropriate to say that frauds are the exception rather than the rule. This is not to mitigate the existence of frauds but to only emphasise that a zero-fraud system is not optimal. The important is the detection of frauds in the incipient stage to ensure minimisation of losses.
Is our legal system sound enough to tackle scams?
The legal system has serious infirmities and foreclosure systems are virtually not existent. There are reports that the question of revamping the legal system and a unified Serious Frauds Office, combining the technical advisory work and the investigating authorities, is under consideration. It is hoped that there would be early action in this direction.
How does the India scenario compare with the global scene?
Frauds occur both in India and other countries. The difference is that in developed financial markets adverse action is swift while in India it is delayed or non-existent. The extent of frauds is probably no higher in India as compared with other countries.
Do you see a pattern in financial frauds?
While each fraud is unique, certain patterns are visible in cases where there is collusion by the officials. There is a pattern of very rapid sanction of limits and the sanctioned amounts are enhanced rapidly after the first sanction.
Again, disbursement and monitoring infirmities are visible and the terms of sanction are violated. Also there is a violation of the delegated powers and ratification is sought of the appropriate authorities. There are only illustrations and it is not as if rapid sanction of limits and their enhancement imply frauds.
How corrupt is the top brass of the Indian financial system?
Corruption is a matter of concern to the country but it is not meaningful to condemn the system as a whole. In the case of top management one case can create a general feeling that the whole system is corrupt.
We need a more discerning approach which concentrates on incipient corruption and timely adverse action. This would be effective as a damage control tool.
Are the bankers still suffering from a fear psychosis? Do you blame this for the tardy credit offtake?
I think the board has given significant comfort to the bankers and they know that frivolous cases would not be taken up.
The so called fear psychosis should not be linked to credit offtake. Credit offtake is linked to the level of economic activity in the country and it has nothing to do with the fear of lending.