In the world of crime, defrauding banks never goes out of style and last year was no exception. Banking frauds—from loans to online transactions—grew in numbers but the amount involved was lower compared to the previous year, the Reserve Bank of India’s report for FY22 shows.
Banks reported 9,103 frauds in FY22 involving Rs 60,414 crore. In comparison, frauds reported in FY21 were 7,359 but the amount was Rs 1.38 lakh crore.
Loan frauds account for 96 percent of the total in terms of value. What is encouraging is the amount involved during FY22 is less than half of that swindled in FY21.
Does this mean bankers have gotten smarter, armed with technology and faster surveillance?
Also read: FY22 provisions jump over 5 times on rise in global interest rates
Not fast, only furious
Detection of fraud remains slow and disappointing. “An analysis of the vintage of frauds reported during 2020-21 and 2021-22 shows a significant time-lag between the date of occurrence of a fraud and its detection,” the central bank said in its annual report.
Frauds reported during a year have not necessarily occurred in that year itself. The process of identifying, monitoring and digging for proof takes many months and in some cases, several years before banks formally report an account as fraud to the regulator.
Detection and following through for proofs seem to have slowed in FY22. For instance, only 12 percent of the frauds reported occurred in the preceding two years. More than 10 percent reported in FY22 have been traced back to transgressions a decade ago. For FY21, more than 20 percent had occurred in the previous two years and less than 4 percent a decade ago.
Also read: Regulations important to ensure sustainable innovation in fintech
Public versus private
Data shows that private sector banks reported the most number of frauds but public sector lenders trumped in value.
Of the total amount involved, public sector banks reported 66 percent of fraudulent value, while private-sector lenders accounted for 29 percent. In terms of the number of frauds, the private sector trumped government-owned lenders with a 58.6 percent share.
Also read: Banks need to be wary of stress in restructured book, rising slippages
A rise in numbers reported may not necessarily indicate a rise in frauds but merely more vigilance in reporting dubious transactions by the lender.
The share of private sector banks in the number of transactions reported has been increasing every year for the past three years, the RBI report shows.
Yet another trend is the increase in the share of cards and internet banking frauds in the overall number of cases.
Also read: FY22 provisions jump over 5 times on rise in global interest rates
The rise of tech in banking has also increased instances of frauds, making the system and consumers vulnerable. In FY22, nearly 40 percent of the total number of frauds were associated with cards and online transactions, up from 30 percent share two years ago. Loans, of course, continue to form the lion’s share in both numbers and value of frauds.
The RBI report includes a review as well as prospects of the Indian economy while covering the banking system as well. It sums up the working of the RBI during the year and its vision and agenda for the next year while sharing its annual accounts.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
