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Banking Frauds

As the name suggests here in this article we would be discussing about Banking Frauds in India.


As the name suggests here in this article we would be discussing about Banking Frauds in India.

As per a recent RBI report, Public Sector Banks account for 85 percent of all bank fraud cases in India.

As per RBI’s latest financial Stability Report, State run lenders reported nearly 6500 fraud cases, amounting to more than 30K crore INR. Top 10 banking frauds that occured in 2018 alone contributed to a financial loss of INR 10K crore. Banks reported nearly 5000 fraud cases totalling 20000 crore INR in financial year 2017.

In past few years, Indian banking sector showed an increasing trend both in terms of number and quantum. In terms of relative share of frauds, PSB’s NPA’s significantly exceeded their relative business share as per the regulator.

While a major share of frauds are in the form of internet banking related scams, unpaid loans or loan defaulters but financial year 2017-18 showed an increasing trend in all these. The quantum and share of PSU bank frauds was much higher than their credit and deposit share, at 65 and 75 percent respectively, as per the data released by RBI.

Fraud amount in PSB’s exceeded their relative share in credit. It could be due to lax internal control mechanisms while issuing loans, due to which their NPA’s swole, the regulator commented.

A significant amount of deterioration in such assets in the PSB segment was due to:

  • Poor credit screening
  • Deficiency in oversight of the account and
  • Information asymmetry between participating banks in consortium arrangements

As per the RBI report.

In all, the regulator stressed that there was not much difference in operational risk oversight frameworks of public and private sector banks, the significant difference that realised in operational risk called for a good amount of introspection in the operational effectiveness of the SOP’s at state-run lenders