Banks Report Frauds worth Rs 34,097 Crore in April-December 2021: RBI Data

In accordance with the Reserve Bank of India (RBI) data, a total of 27 Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs) have reported 96 cases of fraud, worth Rs 34,097 crore in the first  nine months of FY22 (April-December 2021).

• Punjab National Bank (PNB) recorded 10 frauds with the highest value worth Rs 4,820 crore.
• Bank of India (BoI) reported the highest number of frauds at 13, the cumulative value of those was Rs 3,925.

The bank-wise details of frauds were provided in response to a question in the Rajya Sabha during the budget session of parliament by Minister of State (MoS) Bhagwat Karad, Ministry of Finance. Click here for Official Notice.

Table showing Banks ranked by the highest fraud amount in April-December 2021 

Key Points:

i.India lost at least Rs 100 crore every day to bank fraud over the last seven years. Between April 1, 2015 and December 31, 2021, banking fraud worth Rs 2.5 lakh crore was detected across states.

• In this, Maharashtra topped the charts accounting for 50% of the money involved. It is followed by Delhi, Telangana, Gujarat and Tamil Nadu. 
• These five states together accounted for more than Rs 2 lakh crore, or 83%, of the quantum of money lost to financial fraud.

ii.However, there is a sharp decline in fraud occurrences due to structural and procedural reforms. From Rs 67,760 crore in 2015-16, the quantum of money lost to fraud dipped to Rs 59,966.4 crore in 2016-17.  

• In 2019-20, the number further dropped to Rs 27,698.4 crore and then to Rs 10,699.9 crore in 2020-21. 
• The amount in April-December 2021 stands at Rs 647.9 crore.

iii.According to the Ministry’s data, until December 2021, the scheduled commercial banks in the country have reported as many as 2,731 instances of bank frauds. Kotak Mahindra Bank saw the maximum number of these incidents — 642, followed by IDBI Bank (518) and IndusInd Bank (377).

Categories of Fraud:

RBI classifies frauds under 8 categories:

i.Misappropriation and criminal breach of trust

ii.Fraudulent encashment through forged instruments

iii.Manipulation of books of account or through fictitious accounts and conversion of property

iv.Unauthorised credit facilities extended for reward or for illegal gratification

v.Negligence and cash shortages

vi.Cheating and forgery

vii.Irregularities in foreign exchange transactions

viii.Any other type of fraud not coming under the specific heads as above.

Measures taken by RBI to prevent Frauds:

In addition to the master directions, several measures have been taken to deter fraudsters and defaulters which includes the following: 

i.The Fugitive Economic Offenders Act, 2018 allows for attachment of property of a fugitive economic offender. Such properties can also be confiscated and the offender can be disentitled, barring them from defending any civil claim. 

ii.Heads of Public Sector Banks (PSBs) have been empowered to issue requests for issuance of look out circulars. They can also decide on publishing photographs of wilful defaulters, as per RBI norms.

iii.PSBs can obtain certified copies of the passport of the promoters or directors and other authorised signatories of companies availing loan facilities of more than Rs 50 crore.

Recent Related News:

On December 14, 2021, RBI issued the Prompt Corrective Action (PCA) Framework for Non-Banking Financial Companies (NBFCs) to further strengthen the supervisory tools applicable to NBFCs. The provisions of the PCA framework will be effective from October 2022 based on the financial position of NBFCs on or after March 31, 2022. Until now, the RBI had imposed PCA only on banks.

About Reserve Bank of India (RBI):

Established– 1st April 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors– Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar