Bank Frauds Soar in 2018, Despite Stringent Measures: RBI

Bank frauds have increased in 201, despite stringent monitoring, according to RBI data.

2 min read
Reserve Bank of India

Bank frauds have increased in 2018 compared to the previous fiscal, despite stringent monitoring, according to data released by the Reserve Bank of India. The data showed that the fraud amount in 2016-17 was Rs 23,934 crore, but rose to Rs 41,168 crore in 2017-18, increasing four times since 2013-14, reported The Indian Express.

According to the RBI data released on Friday, 28 December, 5,917 cases of bank related frauds were reported this fiscal as against 5,076 instances the previous year. This increase in instances of fraud over the last four years has been fourfold from Rs 10,170 crore in 2013-14, The Indian Express reported.

Ballooning Bad Loans: What Happened

According to the central bank, the Rs 13,000 crore Punjab National Bank Scam, in which fugitive businessmen Nirav Modi and Mehul Choksi are the prime accused, is the primary cause of the sharp rise in bank fraud in 2017-18, reported the Scroll.

“Frauds have emerged as the most serious concern in the management of operational risk, with 90 per cent of them located in the credit portfolio of banks.”
The Reserve Bank of India

According to the central bank, the modus operandi of large-value frauds involves opening current accounts outside the lending consortium without a no-objection certificate from lenders, deficient and fraudulent services/ certification by third-party entities, diversion of funds by borrowers through various means, including through associated/ shell companies, lapses in credit underwriting standards and failure to identify early warning signals, reported The Indian Express.

Bank Frauds in Detail

Frauds related to off-balance sheet operations, foreign exchange transactions, deposit accounts and cyber-activity were the main culprits in 2017-18. As a result, banks lost Rs 109.6 crore in 2,059 cases in 2017-18 as against Rs 42.3 crore with 1,372 cases the previous year, reported The Indian Express.

80 percent of all the frauds reported this year involved large-value frauds. PSU banks reported 93 per cent of fraud cases worth more than Rs 1 lakh, while private banks accounted for six percent, according to The Indian Express report.

The Bottom Line

The rise in the number of frauds has resulted in an increase in bad loans, which were at Rs 10,39,700 crore as of March 2018, according to The Indian Express .

The ballooning of stressed assets had weighed down balance sheets of banks and severely affected their profitability in 2017-18. However, recent data for April-September 2018 showed that non-performing assets have begun to stabilise, according to the Scroll.

(With inputs from The Indian Express and the Scroll.)

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