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Somany ceramics: Polished tiles

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Banks seeing rise in incidents of fraud: Deloitte

“Banks have witnessed a rise in the number of fraud incidents in the last one year,” says the survey titled ‘India Banking Fraud Survey 2012’

Domestic banks have witnessed a rise in the number of frauds in the past one year and expect the trend to continue in the near future, a survey titled ‘India Banking Fraud Survey 2012’ by Deloitte India says. The survey, which covers most public, private sector and foreign lenders along with co-operative banks, also says fraud risks may increase with weakening economic environment.

No bank, whether private, public or MNC, is immune to frauds. As economic conditions continue to soften, it can lead to increased fraud risks. While as many as 93% of the respondents indicated that there has been an increase in frauds, at least 75% said the increase was at least 5% more than the last year. The survey also points out that retail banking will be the most vulnerable to frauds, followed by corporate banking.

“While retail banking is the most vulnerable segment... priority sector lending followed by corporate banking are other two segments in which frauds are likely to happen,” Deloitte Touche Tohmatsu India, senior director, Neeta S Potnis said, adding that as the asset size of a bank increases, it sees higher incidence of frauds.

According to the survey, lack of oversight by the senior managers has been one of the major reasons for frauds. Also, “difficult business scenario” and “business pressure” are the other contributing factors. Types of fraudulent incidents which appear to rank high are retail, corporate and priority sector in the public sector banks, and identity theft along with misuse of power of attorney in private sector banking.

As per the Reserve Bank of India (RBI), the number of fraud cases increased to 24,797 in 2009-10 from 21,247 in 2007-08. Recovery in the case of a fraud is less than 25%, according to over half the respondents, “indicating that banks are not able to recover losses in case of frauds,” the survey says. About the preparedness of the banks to prevent frauds, the survey says it is still a work in progress in many organisations.

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COMMENTS

Nagesh Kini FCA

5 years ago

Banks venturing into non-core operations like selling insurance and Mutual fund products gives the banks little time to concentrate on in-house checks and balances. Bankers have turned sales persons going from door to door canvassing bank assurance and other non-banking products instead of dealing with prevention and detection of frauds.
I write this as a RBI empaneled statutory auditor of bank for long.

prashant n

5 years ago

Is it true that weakening economic environment increases the frauds in an economy?
Or is just another myth, which is handed down from generation to generation?

I see it this way, a weakening economic environment, reduces the resources channeled towards fraud prevention measures, which encourage folks to take chances at frauds.

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