Frauds, registered by banks, of Rs.1 trillion and above, doubled to Rs.1.85 trillion in FY20, the Reserve Bank of India’s annual report revealed. The number of such cases have also increased by 28 percent in the same period.
The date of occurrence of such fraud, however, is spread over several previous years and is reported in the fiscal year. Central bank estimates have also shown that a number of these frauds are both numerical and beneficial in the bank’s loan portfolios.
When a fraud has been declared, banks must set aside 100 percent of the remaining loans following RBI rules, whether on a single go or for four quarters. The central bank has attempted to reduce the gap between fraud and reporting. Although the fraud framework is focused on prevention, early detection, and rapid reputation, the annual report states that the average delay in fraud detection is still long.
The total period between the date of the fraud and its identification by the banks during 2019-20 was 24 months. The delay was, however, even more, pronounced with an average of 63 months for major frauds in excess of Rs.100 crore.
“The high-value frauds were concentrated and 76 percent of the total amount reported as a fraud in the years 2019-20 were the top 50 credit-related frauds. Certain banking fields, such as off-balance sheet transactions and forex transactions have fallen during 2019-20, “said RBI.
Certain fraud segments such as off-balances and cards, or internet banking, made up a much smaller portion of it, constitute 80 percent of Rs.1,85 trillion total registered in FY20. Frauds accounted for by public sector banks representing 98 percent of all or Rs.1,82 trillion, followed by 18 percent by private sector banks.
According to RBI, alongside the enhancement of the simultaneous audit feature, the process of EWS is being reworked with timely and definitive borrower accounts forensic audits being reviewed. In this respect, in consultation with the Central Vigilance Commission (CVC), the Advisory Board for Banking Fraud (ABBF) had been created.
“The weak implementing of early alert signals by banks, failure to detect the EWS during internal auditing, failure to cooperate with creditors during forensic audits, incomplete audit reports and a failure to decide the delayed detection of fraud at joint creditors,” the report said.
Nonetheless, in contrast to the same time last year, the registered fraud declined in the June quarter of FY21. The estimated total for fraud in April-June 2020 was Rs.28,843 crore, compared to Rs.42,228 crore in April-June 2019. The total amount included fraud.
