In its report on ‘Trend and Progress of Banking in India 2018-19’, the Reserve Bank of India (RBI) says there was a 15 per cent spike in the number of frauds and a 74 per cent increase in the amount.
The number was 6,801 in FY19, from 5,916 in FY18; the respective amounts at stake were Rs 71,543 crore and Rs 41,167 crore.
It says frauds, especially the larger ones, tend to get reported with a lag. Thus, though the number of cases reported by banks and the amount involved spiked during 2018-19, both would be trending lower if analysed on the basis of date of occurrence.
“Public sector banks (PSBs) accounted for the bulk of frauds reported in 2018-19 – 55 per cent of the number of cases reported and 90 per cent of the amount involved. Mainly reflecting the lack of adequate internal processes, people and systems to tackle operational risks,” says the report.
“Private sector banks' and foreign banks' shares in the former stood at 30.7 per cent and 11.2 per cent, whereas their shares in the latter were 7.7 per cent and 1.3 per cent, respectively. PSBs’ share in the value of large frauds was even higher, at 91.6 per cent in
Frauds have been predominantly in the loan portfolio, both in number and value. Advances rose to Rs 64,548 crore in FY19, from Rs 22,558 crore in FY18.
RBI says frauds in other areas of banking — card/internet, off-balance sheet and forex transactions, in terms of value, had reduced (in terms of date of reporting) in 2018-19 vis-à-vis the previous year. Large value fraud (Rs 50 crore or above) was 86.4 per cent of all those reported during the year in terms of value.
The central government issued a framework of rules for timely detection, reporting and investigation of fraud in PSBs. This requires them to evaluate bad loan accounts exceeding Rs 50 crore from the angle of possible fraud, to supplement the earlier efforts to unearth such transactions. This could have helped cause the sharp jump in reported fraud during 2018-19.