Banks would soon be able to seamlessly share data on frauds through a dedicated exchange, just like credit reports, if the proposal to form a specialised exchange gets the government’s nod.
The idea to create the exchange is the brainchild of three public sector banks — Bank of India, Bank of Baroda and Allahabad Bank — which were entrusted by the government to look into the rising the number of frauds in the banking system, said a person familiar with the development.
The banks, in their recommendations to the department to financial services (DFS), have suggested forming an exchange, with a 74-per cent private partnership, for sharing the data on a real-time basis.
The move to entrust the three banks with the task followed PSB Manthan, which was held in November 2017, and involved senior management of PSBs and representatives from the government discussing reforms in the banking system.
While initially, the proposed exchange would serve only public sector banks, later it could be extended to private sector banks also, said the source. However, DFS is yet to accept the suggestion.
According to the recent RBI annual report, in FY19, the banking sector reported 6,801 frauds involving Rs 71,542.93 crore, as against 5,916 cases involving Rs 41,167.04 crore in FY18.
Among bank groups, PSBs accounted for the bulk of frauds reported in 2018-19.
The value of frauds at PSU banks rose from Rs 38,260 crore in FY18 to Rs 64,509 crore in FY19.
At present, lack of coordination among banks to declare an account in case of consortium lending is a major cause of delay in its identification for collective action. The average lag between the date of occurrence of frauds and its detection by banks was 22 months, the RBI report said.
A few days back, Ashok Kumar Pradhan, MD and CEO of United Bank of India, had said that there was a need for collective action against fraud. The bank had suggested the need for an umbrella organisation in the banking and financial services sector to protect against cyber frauds. Banks could pool in funds for the organisation to address the cybersecurity concerns, said Pradhan.