Frauds in banks have increased almost four-fold in the past four years since 2015 from a little above Rs 19,000 crore to Rs 71,000 since the Reserve Bank of India said in a report and sought the lenders address the menace to reaffirm a robust financial sector that minimises systemic risks.
“Frauds have been predominantly occurring in the loan portfolio, both in terms of number and value,” it said.
RBI said the modus operandi of large value frauds that account for 86.4% of all frauds reported during the years in terms of value, involved diversion of funds by borrowers through various means, mainly via associated or shell companies, accounting irregularities, manipulating financial or stock statements opening current accounts with banks outside the lending consortium without a no-objection certificate from lenders.
PSBs accounted for a number of frauds in 2018-19. In about 55% cases, the amount involved was 90%, reflecting the lack of adequate internal processes, people and systems to tackle operational risks.
The share of private banks and foreign banks in the fraud stood at 31% and 11% respectively, PSBs’ share in the value of large frauds was even higher at 91.6% in 2018-19, the report said. It, however, said that fraud incidents relating to other areas of banking such as card, internet, have reduced in 2018-19 vis-à-vis the previous year.