Bank frauds more than doubled to Rs 1.85 trillion in FY20: RBI

Bank frauds of Rs 1,00,000 or more have more than doubled in value to Rs 1.85 trillion in FY20, with the number of such cases increasing 28% in the same period, the Reserve Bank of India’s annual report showed on Tuesday. These frauds occured over the past few years but have been accounted for in the financial year they were reported.  Data from the central bank also showed that a majority of these frauds are in loan portfolios of banks, both in terms of number and value. 

“There was a concentration of large value frauds, with the top 50 credit-related frauds constituting 76% of the total amount reported as frauds during 2019-20. Incidents relating to other areas of banking, like off-balance sheet and forex transactions, fell in 2019-20," said RBI. 

The report further revealed that 80 per cent of these reported frauds happened in the public sector while the private sector accounted for 18 per cent. Frauds in loans constituted 98% of the total frauds or at Rs 1.82 trillion, with other segments like off-balance sheet and cards or internet banking forming much smaller part of it. 

The average lag between the date of occurrence of frauds and their detection by banks and other financial institutions was 24 months during 2019-20. However, the delay was even greater for large frauds of Rs 100 crore and above with an average lag of 63 months. 

“Weak implementation of early warning signals (EWS) by banks, non-detection of EWS during internal audits, non-cooperation of borrowers during forensic audits, inconclusive audit reports and lack of decision making in joint lenders' meetings account for delay in detection of frauds," said the report. 

The RBI said that it is setting up the advisory board for banking frauds (ABBF) in consultation with the central vigilance commission (CVC). 

“The ABBF functions as the first level of examination of all large value fraud cases before recommendations or references are made to the investigating agencies by public sector banks (PSBs)," the annual report read. 

However, banks have seen a decline in reported frauds in the June quarter of FY21 as compared to the same period last year.