Bank frauds increase, private sector lenders make more write-offs

Private banks in FY23 accounted for 74% of amounts written off due to fraud

The Asset Quality Review of 2015 by the Reserve Bank of India (RBI) has served its purpose and the "era of loan write-offs’ is over, said State Bank of India’s chairman this week.

Since Financial Year 2015-16 (FY16), all banks have written off more than Rs 1.01 trillion due to fraud (based on the date of reporting of frauds), or roughly Rs 13,000 crore annually. Banks reported about Rs 3,000 crore in write-offs in FY16, or 0.04 per cent of total credit that year.

In comparison, write-offs due to frauds accounted for 0.03 per cent of total credit in FY23, though the overall figure was still higher than in FY16 as seen in chart 1.

Banks wrote off more than Rs 10 trillion between FY19 and FY23. Fraud write-offs were 9 per cent of this amount.

In FY16, state-owned banks reported 80 per cent of all amounts written off for fraud. Private banks' share was 12 per cent. The share flipped in FY21 when state-owned banks accounted for 14 per cent of write-offs and private banks 79 per cent.

Private banks in FY23 accounted for 74 per cent of amounts written off due to fraud and state-owned ones comprised 24 per cent (Chart 2).
 

As the total number of bank frauds increased from 6,800 in FY19 to more than 13,500 in FY23, the share of private banks in the occurrence went from 34 per cent to 66 per cent (Chart 3).
 

The amount involved in such frauds declined from Rs 71,500 crore to Rs 30,200 crore in the same period. The amount involved in all bank frauds had topped Rs 1 trillion in FY20 and FY21. However, the share of private banks in the amount involved in frauds increased from 10 per cent in FY19 to 30 per cent in FY23. 

Of all bank frauds in FY23, those involving loans comprised 30 per cent. Of all the amounts involved in fraud, 95 per cent was in loans.