Frauds in the banking sector involving sums of over ₹100 crore have declined significantly, with banks reporting cases worth ₹41,000 crore in 2021-22 compared to ₹1.05-lakh crore in the previous year. According to official data, the number of fraud cases in private as well as public sector banks (PSBs) dropped to 118 in FY22 from 265 in 2020-21.

In the case of PSBs, the total number of fraud cases of over ₹100 crore declined to 80 from 167 in FY21, while for private sector lenders such cases reduced to 38 in FY22 from 98 earlier, as per the data. In terms of cumulative amount, it has come down to ₹28,000 crore from ₹65,900 crore in FY21 for PSBs. For private sector banks, the reduction is from ₹39,900 crore to ₹13,000 crore in FY22.

Ways to check frauds

In a bid to check frauds, the RBI has been taking several steps, including improving the efficacy of the Early Warning System (EWS) framework, strengthening fraud governance and response system, augmenting data analysis for monitoring of transactions and introduction of dedicated Market Intelligence (MI) Unit for frauds.

During 2021-22, the Reserve Bank of India (RBI) carried out a study on the implementation of EWS framework in select Scheduled Commercial Banks, in collaboration with the Reserve Bank Information Technology Private Limited (ReBIT). Further, the effectiveness of EWS was assessed in select banks by using Machine Learning (ML) algorithms.

Banks that reported fraunds

Earlier this year, State Bank of India (SBI) reported one of the biggest bank frauds in the country totalling ₹22,842 crore, perpetrated by ABG Shipyard and promoters. This was much higher than the case involving Nirav Modi and his uncle Mehul Choksi, who allegedly cheated Punjab National Bank (PNB) of around ₹14,000 crore through the issuance of fraudulent Letters of Undertaking (LoUs).

Last month, the Central Bureau of Investigation (CBI) booked Dewan Housing Finance Ltd (DHFL), its former CMD Kapil Wadhawan, director Dheeraj Wadhawan and others in a fresh case involving ₹Rs 34,615 crore, making it the biggest bank fraud probed by the agency.

A consortium of lenders led by Union Bank of India has alleged that the company had availed credit facility to the tune of ₹42,871 crore between 2010 and 2018 from the consortium under various arrangements but started defaulting on repayments from May 2019 onwards.

The accounts were declared non-performing assets at different points of time by banks. The bank alleged that the promoters along with others siphoned off and misappropriated a significant portion of the funds by falsifying the books of DHFL and dishonestly defaulted on repayment of dues. This caused a loss of ₹34,615 crore to the 17 banks in the consortium.