The Reserve Bank of India (RBI) has taken upon itself the task of investigating bank frauds after a series of inquiries by banks themselves in high-profile cases such as those involving Deccan ChronicleBSE 1.81 % and Kingfisher Airlines yielded very little. 

The Board of Financial Supervision (BFS), chaired by RBI governor Raghuram Rajan, has, in fact, cleared a proposal that the central bank will conduct an independent forensic audit of corporates declared fraudulent by banks. Independent audits, however, will be restricted to corporates that have borrowed more than Rs 1,000 crore. 

The central bank will first try to get to the bottom of what went wrong with Deccan Chronicle. What's interesting is that the mandate has been given to PwC, which was banned by the RBI for nearly a decade for possible audit lapses of Global Trust Bank. The bank was later forcefully merged with the Oriental Bank of Commerce for alleged mismanagement. 

In response to an email from ET, a PwC spokesperson "declined to comment", while the RBI did not respond to ET's email. However, senior bank officials with exposure to Deccan Chronicle told ET they have received a letter from the RBI urging them to cooperate with PwC. 

The Hyderabad-based Deccan Chronicle borrowed Rs 4,000 crore from a consortium of 18 lenders, who allege the company misused the banking system by borrowing from one set of lenders without keeping others in the loop. Bank officials say the central bank's move reflects poorly on the banks, and reaffirms the fact that banks and some promoters have developed cozy relationship, that has led to thousands of crores of bad loans. 

A consortium of lenders led by Canara Bank appointed Ernst & Young to conduct a forensic audit on Deccan Chronicle, but it yielded very little. "The report itself was inconclusive and lenders did not to act upon it," said a bank chief who did not want to be named.