Loan fraud cases sharply fall in 2019-20; SBI registers highest improvement but this bank suffers

The cases related to bank loan frauds have significantly decreased in the financial year 2019-20 even as the bank credit has increased on-year. There has been a steep reduction in the occurrence of bank frauds, with the amount involved in loan-related frauds declining steeply to 0.15 per cent of total advances of PSU banks in FY 2019-20. The number of loan-related frauds also fell to 292 in the last fiscal year, Anurag Thakur, MoS, Ministry of Finance, said in a reply to a question in Lok Sabha. It is to be noted that in the fiscal year 2018-19, the State Bank of India alone dealt with 259 cases related to loan fraud.

India’s largest bank SBI saw the largest reduction in the number of cases related to loan fraud. After 284 cases in FY18 and 259 cases in FY19, the number of cases rolled down to a mere 48 in FY20. Cases in Syndicate Bank also fell from 138 in FY18, to 59 in FY19, and further to 20 in the last fiscal. However, UCO Bank and Punjab and Sind Bank saw a sudden uptick in the cases related to loan fraud. 

Two banks with highest cases of loan fraud in FY20

UCO Bank saw the highest, 64 cases of loan-related bank frauds in the year. The cases in UCO Bank steeply surged from 14 in FY18 and 8 in FY19. Similarly, such cases in Punjab and Sind Bank rose from 6 in FY18 to 2 in FY19 and further to 23 in FY20. 

Altogether, a sharp reduction in loan fraud is attributed to increased vigilance by the banks. “Comprehensive steps taken to check bank frauds and strengthening of monitoring of the banking mechanism have led to this reduction,” the government said. The framework for timely detection, reporting, investigation, etc, relating to large value bank frauds to PSU banks for dealing with suspected frauds involving a sum of over Rs 50 crore has helped in the early detection of loan fraud. 

Further, the enactment of the Fugitive Economic Offenders Act, 2018 to provide for attachment of property of a fugitive economic offender, confiscation of such offender’s property, and disentitlement of the offender from defending any civil claim has generated a sense of fear in fraudsters. The empowerment of the heads of PSU banks to issue requests for issuance of look-out circulars has also helped in the early detection of suspected transactions.