Bank frauds jumped 159% in FY20 to touch Rs 1.9 lakh crore; PSBs worst-hit

New Delhi, 26-Aug-2020

Banks and financial institutions reported a 28% jump in the total number of fraud cases, with a value of Rs 1 lakh or higher, during 2019-20 while the overall value of these was 159% higher as compared to scams reported last year. Despite the Reserve Bank of India (RBI) tightening norms, at Rs 1.9 lakh crore, the value of 8,700 fraudulent cases in FY20 was two and half times higher than Rs 71,500 crore reported in the previous year. These numbers were revealed in the Reserve Bank of India�s (RBI�s) annual report. Out of these cases, 4,610 cases or 98% of the total fraud cases amounting to Rs 1,82, 051 crore were reported on loans taken by customers. Internet and card-related scams amounted to Rs 195 crore worth of criminal financial activity. Unsurprisingly, at 4,413 cases of Rs 1,48,400 crore in value, most of the fraud cases were reported in public sector banks (PSBs) while private banks recorded 3,066 such cases worth Rs 34,211 crore. However, the RBI report indicated that the fraudulent cases reported in 2019-20 were actually committed in previous years as there was a lag of 24 months between a scam occurrence and its subsequent detection. Meanwhile in scams involving Rs 100 crore or above, the average lag in occurrence and recording was 63 months. �The dates of occurrence of these frauds are spread over several years,� the RBI annual report said. The central bank said it will study some large-value frauds to understand the reasons behind the delays in identifying the wrongful activity. The sanction of the credit facility in many of these accounts was much older, RBI said.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 RBI report said. The EWS mechanism is getting revamped alongside the strengthening of the concurrent audit function, with timely and conclusive forensic audits of borrower accounts under scrutiny, it added.