Banks lost Rs 4,448 cr to fraud in 2011-12

The amount was lost in 5,569 incidents reported by Indian banks, FM tells House

Indian banks lost a whopping Rs 4,448 crore to frauds in the last financial year. The revelation by the finance minister came in response to a Parliament query. “According to the Reserve Bank of India’s (RBI) record, the incidents of frauds reported by the banks during FY12 were 5,569 cases involving an amount of Rs 4,448 crore,” the minister said in a statement in response to a query by member Sanjay Raut.

Citing RBI, the statement said, major frauds included misuse of loans sanctioned for purposes other than those for which these are sanctioned, lack of proper due diligence by the banks and direct sales agents (DSA), fake title deeds submitted as collateral security and disposal of assets created by loans without the knowledge of the bank.

 

In some cases, ‘the banks had not carried out the pre-sanction inspection of property for the acquisition of which the loan was being sanctioned to ascertain if the unit/ property really existed.’

There were also instances where the borrowers fooled the banks by submitting fake documents related to ‘know your customer’ compliance and could not be found at the given addresses after the realease of the loan amount. Banks also succumbed to fake and fabricated financial statements and salary slips that showed an “improved financial position of the borrowers.”

Detailing the steps taken by RBI, the minister’s statement said, “RBI has issued detailed instructions vide master circular dated July 1, on Frauds- classification and reporting” containing all the details/ aspects relating to frauds.”

On receipt of fraud reports from banks, various aspects related to frauds are examined and concerned banks are advised to report the case to Central Bureau of Investigation (CBI)/police/ Serious Fraud Investigation Office (SFIO). Banks are also advised to examine staff accountability, complete proceedings against erring staff expeditiously, take steps to recover the amount involved in the fraud, claim insurance wherever applicable and streamline the system and also procedures so that frauds do not recur, the statement said.

Despite these efforts the size of bank frauds have been growing consistently. In August, CBI chief AP Singh had put the amount of bank frauds in 2010-11 at Rs 3,799 crore, a growth of 53 per cent over Rs 2,017 crore frauds recorded in 2009-10.

Speaking at an annual conference of chief vigilance officers of banks, Singh had said CBI was developing a Bank Case Information System (BCIS) which contain names of accused, borrowers and public servants in its records.

“This information may also be made accessible to field functionaries of the banking sector in collaboration with the Indian Bank Association (IBA) once modalities are worked out,” he had said. RBI had in the past asked banks to put in place concurrent audit systems, constitute fraud monitoring committees to monitor frauds, etc, the FM’s statement said.