NEW DELHI: The Serious Fraud Investigation Office (SFIO) probing the IL&FS case has recommended a detailed internal investigation by the Reserve Bank (RBI) to identify reasons for delay in detection of lapses in operations of IL&FS Financial Services Ltd (IFIN).
In its three key recommendations, the SFIO said that RBI, in its inspection reports from 2015 onwards, had repeatedly pointed out non-compliance to group exposure norms at IFIN, an NBFC regulated by the central bank, along with wrong calculation of ‘Net Owned Funds’. However, no penalties were imposed on IFIN during the period and the firm was allowed to continue operations without corrective actions, the SFIO probe found.
SFIO has recommended that the RBI should conduct an internal investigation to find out reasons for the lapse and take appropriate action. The central bank has also been asked to take necessary policy measures to prevent such fraudulent activities in future.SFIO has also recommended necessary actions to be taken up by the current IFIN management under the Companies Act for recovery of losses suffered by the firm due to the fraudulent conduct of a coterie of erstwhile management members, as well as auditors.
In case of the three IL&FS auditors, the matter has already been referred to the National Financial Reporting Authority, which will evaluate the charges and initiate action against them.The SFIO has filed its first charge sheet on May 30, where it identified a nine-member coterie behind the huge financial fraud at IFIN. The coterie, it alleged, connived with statutory auditors and some independent directors to defraud IFIN, while running it as a “personal fiefdom”.While the first charge sheet delves only into IFIN’s affairs, SFIO said similar probes are underway into operations of other group entities and IL&FS.
central bank’s lapse
SFIO said that RBI, in its inspection reports from 2015 onwards, had repeatedly pointed out non-compliance to group exposure norms at IFIN, but no penalties were imposed. IFIN was allowed to continue operations without any correctinve actions, it said.