Money & Banking

Fraud cases: Total amount reported by banks/FIs rises 159% in FY20

Our Bureau. Mumbai | Updated on August 25, 2020

The total amount involved in fraud cases reported by banks/financial institutions jumped 159 per cent to ₹1,85,644 crore in FY20 against ₹71,543 crore in the year-ago period, according to Reserve Bank of India’s latest annual report.

The total cases of frauds reported by banks/FIs increased by 28 per cent by volume to 8,707 from 6,799 in the year-ago period.

The RBI said frauds have been predominantly occurring in the loan portfolio (advances category), both in terms of number and value.

There was a concentration of large value frauds, with the top fifty credit-related frauds constituting 76 per cent of the total amount reported as frauds during 2019-20, it added.

Incidents relating to other areas of banking – off-balance sheet and forex transactions – fell in 2019-20 vis-à-vis the previous year.

Public sector banks accounted for about 80 per cent of the ₹1,85,644 crore total amount involved in frauds by value. Private sector banks accounted for about 18 per cent of the total.

The RBI said average lag between the date of occurrence of frauds and their detection by banks/ FIs was 24 months during 2019-20 (22 months in 2018-19).

In large frauds – ₹100 crore and above – the average lag was 63 months (55 months). The sanction of the credit facility in many of these accounts was much older.

Reason for frauds

The RBI assessed that 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.

The EWS mechanism is getting revamped alongside strengthening of the concurrent audit function, with timely and conclusive forensic audits of borrower accounts under scrutiny, it added.

Published on August 25, 2020

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