NEW DELHI: The Reserve Bank of India (RBI) will initiate an internal enquiry into its own lapses regarding detection of fraud in Infrastructure Leasing & Financial Services Ltd (IL&FS), subsidiary IL&FS Financial Services Ltd (IFIN), on recommendation from the Ministry of Corporate Affairs (MCA).
“The Serious Fraud Investigation Office (SFIO) charge sheet has flagged some lapses on part of the RBI. The central bank has taken note of it and will initiate an internal probe,” an MCA official told TNIE.
The SFIO, which is probing the IL&FS case, had suggested that RBI conduct a detailed internal investigation to identify reasons for the delay in detection of lapses at IFIN, a non-banking financial company regulated by RBI.
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In its three key recommendations, the SFIO said it has observed that RBI, in its inspection reports from 2015 onwards, had repeatedly pointed out non-compliance to group exposure norms at IFIN, and also the wrong calculation of ‘Net Owned Funds’. However, no penalties were imposed on IFIN during this period and the firm was allowed to continue operations without any corrective action, the probe found. SFIO had recommended that the RBI should conduct an internal probe to find reasons for the delay and take appropriate action.
The agency has also recommended that the current IFIN management take necessary action under the Companies Act for recovery of losses suffered by the company owing to fraudulent conduct of a coterie of top IL&FS executives.