Home Banking Banking Frauds & A Increase In Them

Banking Frauds & A Increase In Them

by Banking Desk
Banking Frauds

“Banking Frauds” We all are aware of this term very well. Many of us have been a victim too.  So here we are discussing “how these scams are increasing“.

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 totaling 20000 crore INR in the financial year 2017.

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

While a major share of frauds is 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 were 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 the 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 the 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 realized in operational risk called for a good amount of introspection in the operational effectiveness of the SOP at state-run lenders.

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