Twitter image of the Enforcement Directorate.

The Enforcement Directorate (ED) has so far investigated about 1,160 cases of money laundering related to bank loan fraud, arrested about 174 accused and seized proceeds of crime worth about Rs 65,279 crore in the last few years.

The assets of the borrowers who had cheated various lending banks and other financial institutions were either attached, seized or frozen through 473 interim orders. Based on these findings, the ED has so far filed 314 chargesheets (charge-sheets), including 70 supplementary charge-sheets, before the court constituted to try cases under the Prevention of Money Laundering Act (PMLA).

According to government records, trials in some cases have been completed with eight accused convicted and proceeds of crime amounting to around Rs 15,295 crore confiscated. A significant development is that nearly Rs 15,185 crore has already been returned to the lending banks concerned. Around 12 accused have been declared suspected offenders by special courts for not cooperating in the investigation.

Apart from this, about Rs 725 crore were seized under relevant provisions of the Fugitive Economic Offenders Act and eight accused were declared fugitive economic offenders by the courts on the basis of the ED’s submissions.

“The action taken by the ED not only leads to initiation of criminal action against fraudsters but also helps in recovery of assets held by them. The ED investigates money trails which involve multiple layers and a web of entities which are analysed to identify the ultimate beneficiaries of the bank funds. Many investigations have led to tracing the assets held by the offenders to various shell companies run by fake directors,” said a government official aware of the findings.

In some cases, assets were held directly in the name of relatives and friends of the masterminds, while in most cases, the assets were secretly held by several beneficial but unrelated entities to avoid detection and recovery of the loan amounts. “The stringent conditions of the PMLA do not allow those arrested to get bail easily. This helps reduce the non-performing assets of the banks by deterring criminal action and confiscating assets,” the official said.

Explanation of the various Procedure The official said that in such cases, bank loans were taken by tampering with the books of accounts and forgery and the funds were subsequently siphoned and diverted. The promoters of several companies were found to be involved in this. Some of the major cases being investigated by the ED are those of Bhushan Steel, allegedly amounting to Rs 56,000 crore; ABG Shipyard Limited, allegedly amounting to Rs 22,842 crore; and a case related to Amtek Group in connection with a Rs 20,000 crore bank fraud case.

According to the Reserve Bank of India’s annual report, 36,075 bank fraud cases were reported in 2023-24, which is almost 166% more than the 13,564 fraud cases reported in 2022-23. However, the amount decreased by 46.7% to Rs 13,930 crore in 2023-24 from Rs 26,127 crore in the previous financial year.

“The RBI and law enforcement agencies have been working closely to prevent loan accounts from becoming NPAs (non-performing assets) due to criminal activities. According to the ‘Report on Trends and Progress in Banking in India 2022-23’, the asset quality of banks, as measured by gross NPA ratios (GNPA), has improved since 2018-19. In 2022-23, the GNPA ratio of scheduled commercial banks fell to a ten-year low of 3.9% in March 2023 and further to 3.2% in September 2023,” the official said.

“During 2022-23, the total amount of frauds reported by banks fell to a six-year low, while the average amount of fraud was the lowest in the decade. During April-September 2023-24, while the number of reported frauds increased compared to the same period last year, the amount was only 14.9% of the previous year. The asset quality of the industrial sector continued to improve, with its GNPA ratio standing at 4.2% at the end of September 2023. Within the industrial sector, the GNPA ratio of large industries fell from 22.9% in March 2018 to 4.6% in June 2023,” the official said, citing recent financial reports.