As of March 31, 2021, the banks operating in India reported fraud of Rs 4.92 trillion.
This nearly represents 4.5 percent of the total bank credit, as presented by the Reserve Bank of India (RBI) data, which was sought under the Right to Information (RTI) Act by Saurabh Pandhare.
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Increase In Loan Fraud
Further, this data revealed over 90 banks and financial institutions reported a total of 45,613 cases of loan fraud till March 31, 2021.
Out of these cases, the country’s largest lender, State Bank of India reported the highest amount of loans as fraud of Rs 78,072 crore as of March 31, 2021.
After SBI, Punjab National Bank reported Rs 39,733 crore, Bank of India reported Rs 32,224 crore and Union Bank of India reported Rs 29,572 crore of fraud amount.
The RTI report from RBI mentioned that “Bank-wise data on frauds of banks which got merged with other banks later (such as Andhra Bank, Corporation Bank, etc) is provided as reported by each bank during the period during which the bank was operational,”.
In this report, the top five banks account for 42.1 percent or Rs 2,06,941 crore of the total frauds classified by the banks.
Fraud In Private Sector Bank
If we talk about the private sector banks then ICICI Bank led there with the amount involved in loan frauds (5.3 percent), followed by Yes Bank (4.02 percent) and Axis Bank (2.54 percent).
In total, the above-mentioned three private sector banks constituted 11.87 percent of the total amount involved in loan fraud.
Interestingly, the largest private sector lender, HDFC Bank’s amount involved in the loan frauds was 0.55 percent of the total.
According to the RBI norms, the banks are required to make 100 percent provision for the entire amount that has been classified as fraud.
The Indian banking sector reported a 159 percent jump in dubious transactions to Rs 1.86 trillion in 2019-20, as per the RBI’s annual report.
In the Financial year 2020, the number of frauds grew by 28 percent to 8,707 from 6,799 in the previous financial year.
Further, the reports show a concentration on high-value frauds with top 50 credit accounts, which contributed to 76 percent of the frauds reported in 2019-20.
An overwhelming number of frauds related to loans were reported in RBI data for FY20 and FY19.
While, the off-balance sheet items, deposits and internet form a minuscule proportion of credit-related frauds.
What Does That Mean?
This report indicates that most frauds were committed by borrowers.
According to the bankers, one of the reasons behind the sharp rise in the reported number of frauds in the last few years is a government directive issued in February 2018.
The directive mandated lenders to probe all non-performing accounts of Rs 50 crore and above for possible fraud and report it to the Central Bureau of Investigation (CBI).
Huge Amount Of Willful Defaulters
The data obtained by the report also shows that over 2,261 accounts have been identified by the banks as wilful defaulters as of December 31, 2020.
In total these defaulters involved in Rs 1.72 trillion amount.
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