Bank frauds up 28% last year; PSU banks account for over half the cases

The amount involved in all the fraud cases was recorded at Rs 71,543 crore in financial year 2019, the value of the fraud cases increased to reach Rs 1,85,644 crore last fiscal year.

Cases of fraud at banks and financial institutions increased 28% in volume terms during financial year 2020, RBI’s annual report, released on Tuesday, showed. The fraud cases, of Rs 1 lakh or above, surged from 6,799 in financial year 2019 to 8,707 in the previous fiscal year. In value terms, the jump in such fraud cases was much higher at 159%, according to RBI’s data. Of the total fraud cases at financial institutions and banks, 50.7% of the cases were from the public sector banks. India’s financial sector players have been battling with non-performing assets for years now. With the onset of the coronavirus pandemic and the economic slowdown, experts believe that lenders could witness more stressed assets in the near-term.

The amount involved in all the fraud cases was recorded at Rs 71,543 crore in financial year 2019, the value involved in the fraud cases increased to reach Rs 1,85,644 crore last fiscal year. The date of occurrence of these frauds are, however, spread over several previous years, the report said. Of the total amount involved in these fraud cases, 80% or Rs 1,48,400 crore was from the public sector banks. Private sector banks saw 3,066 fraud cases, translating to Rs 34,211 crore. However, the said amount does not indicate the loss incurred by the lender. Depending on recoveries, the loss incurred by banks and financial institutions gets reduced. 

“Frauds have been predominantly occurring in the loan portfolio (advances category), both in terms of number and value,” the report said. Of the total fraud case, 53% or 4,610 were related to advances made by the lenders. During the last fiscal year, Rs 1,82,051 crore was registered as fraud, which was 98% of the total amount involved. After advances, the highest number of frauds in volume terms were seen in the card/interest segment. A total of 2,678 bank fraud cases were recorded in this segment. “There was a concentration of large value frauds, with the top fifty credit-related frauds constituting 76% of the total amount reported as frauds during 2019-20,” RBI said. 

The annual report of the central bank said that the average lag between the date of occurrence of frauds and their detection by banks and financial institutions was 24 months during 2019-20. The RBI said that in large frauds, where the amount involved is Rs 100 crore and above, the average lag was 63 months.