The rot of fraudulent loans is not confined to Indian Public Sector Banks any more – private bankers are giving them a tough competition. Corporate and banking frauds seem to be flavor of the season in India sadly. Every day, Millions and billions of Rupees are reported to have been swindled by (so far very respected but in reality) fraudster businessmen acting hand in glove with (very sophisticated, English speaking and high flying) corrupt bankers.

These frauds are jolting the Indian corporate sector and crippling the banking sector.

Following the Punjab National Bank fraud (biggest in Indian banking history, so far), the Ministry of Corporate Affairs (MCA) seems to have acknowledged the imminent need to conduct intensive review of the Companies law administration; and working to tighten the screws to thwart re-occurrence of such instances.

Apparently, as part of investigation pertaining to the PNB fraud, 107 companies and 7 Limited Liability Partnerships have been investigated and fraudulent letter of undertaking is detected as the main cause for the fraud.

These corporate frauds exposed the systematic failure of legal and regulatory authorities, the prospect of the review of companies’ law is to identify any loopholes in the existing laws and administration system that opening the window to the corporate fraudsters to commit fraud and walk away without any guilty and fear of getting punished for violation of law.

It is time to fix such loopholes by amending the existing laws (if needed) and most important prospect is the effectual implementation of any revised laws.

Laws should be strictly enforced to sternly deal with the corporate fraudsters to generate fear in the mind of businessmen that no one will be able to escape the punishment for the violation of the laws – then only the panorama of thwarting the corporate frauds will be probable.

In the overall interest of the nation, the Institute of Chartered Accountants of India (‘ICAI’) too is conducting an intensive study into the PNB fraud to detect the gaps causing systematic failure of corporate and banking administration and to suggest curative measures to reinforce and salvage the banking system from ongoing crisis.

Another prospect of the ICAI study is to guide the chartered accountants to demeanor the audit to substantiate the systems and accounts are properly organized without leaving any latitude for any bias or unlawful favors to the fraudsters.

Mere conducting of the review of the companies’ law and amending the provisions won’t be adequate to thwart the frauds – unless and until the amended laws are put into practice without fail and any bias – business men also need to be responsible, accountable and careful before committing the frauds they should understand the malignant impact of such frauds on the corporate sector hindering the development prospect of the nation.

One can hope that the MCA review of the companies laws will aid in detecting the gaps in the laws and administration system and fix them accordingly – right administration contrivance will be established for the strict enforcement of laws to foil the repetition of frauds.

Research inputs by Paruchuri Baswanth Mohan