Govt Banks Reduce Frauds By 34%; But Private Banks Witness 21% Jump! (Which Cases Are Rising?)

Various public sector banks have worked to put their processes in order after the multi-billion dollar Punjab National Bank scam. All the public sector banks have decided to learn a lesson.

More than double the overall 15% decline in frauds in the banking system, for fiscal 2020-21 the number of frauds in PSBS fell 34%. Also notably according to the RBI annual report for fiscal 2021, frauds in the private banks rose 21% during the period.

From 80% in fiscal 2020, the share of PSBs in total fraud value shrank to 59.2% this fiscal, while that of private sector banks increased to 33.5%. A share of 18.4% was reported by the private banks in fiscal 2020.
A total of 7,363 frauds worth Rs 1,38,422 crore across all the banks and areas of operations has been reported by the RBI.

Online frauds Rise

By the end of March 2021, the number of frauds in the online space shot up 34.6%, out of which 99% of the total frauds reported in the fiscal year gone by were from the advances category in value terms. Notably, the incidence of frauds in the advance category have come down over the previous year whereas the value of frauds in the advances category remained almost the same as compared to the last year.

As far as value is concerned, a rise of 35% y-o-y in frauds was reported during FY21 by private banks and a decline of 45% was reported by PSBs.

The remaining time between the time of the crime and the date of acquisition was 23 months for fraudsters reported in 2020-21. However, in the case of a massive fraud of $ 100 million or more, the average was 57 months of the same period. With regard to the workplace, fraud was most prevalent in the loan portfolio (Advances category), both in terms of value and value, the RBI said.

Reducing frauds

Improving the efficacy of early warning signal (EWS) framework, fraud governance and response system is currently a priority for the central bank in order to enhance fraud risk management system.

This includes:

• Data analysis augmentation for transactions monitoring
• Dedicated market intelligence (MI) unit for frauds
• Implementation of automated unique system generated number for each fraud.

Spread over up to four quarters, 100% provisioning of the outstanding loans has to be made by the banks for an account declared fraud.