Public Sector Banks Reported Fraud Worth Rs87,284 Crore in 32,839 Cases over 5 Years: Govt
Moneylife Digital Team 26 July 2022
During the past five years, public sector banks (PSBs) have reported 32,839 cases of fraud worth Rs87,284 crore, the Rajya Sabha was informed. 
 
In a written reply, minister of state for finance Dr Bhagwat Karad says, “As per Reserve Bank of India (RBI) data, PSBs reported 2,369 cases of frauds involving Rs3,204 crore in FY22. While FY18 witnessed fraud worth Rs28,884 crore, during FY20, there were 11,074 cases of frauds, which were highest in past five years. Over the past five years, there is a decline in number of fraud cases and the amount involved.”
 
However, the minister could not provide a list of companies and the amount involved in these scams during the last five years. "With regard to list of companies, RBI has apprised that an exclusive field in the name of the perpetrator as 'companies' in fraud monitoring returns (FMR-1) to generate the same in their database is not maintained by it. RBI has further apprised that information regarding the involvement of current members or former members of the state legislatures and Parliament in scams is not maintained by it," he says. 
 
Members of Parliament (MPs) Dr V Sivadasan and Vandana Chavan have asked about complaints regarding frauds by banks. 
 
During FY21-22, the maximum number of frauds (924) were reported by the State Bank of India (SBI), involving an amount of Rs201.35 crore. However, with just 68 cases of fraud, the amount reported by Punjab National Bank (PNB) is Rs2,168.57 crore. 
 
 
The minister says that RBI has taken comprehensive steps to tackle banking frauds. It includes setting up the Central Fraud Registry, an online searchable database for frauds reported by banks to enable timely identification, control and mitigation of fraud risk and also to carry out due diligence during the credit sanction process. 
 
RBI has issued master directions on frauds, which requires banks to report frauds beyond a threshold amount to the police, monitoring and follow-up of cases by a special committee, quarterly placement of information before audit committees of bank boards, and annual review of frauds by banks. 
 
"These reviews cover, inter alia, preventive measures, fraud detection systems, systemic lacunae, remedial action, monitoring of progress of investigation and recovery, and staff accountability," Dr Karad says.
 
For management of fraud risk and early detection of loan frauds, prompt reporting to RBI and investigative agencies, and timely initiation of staff accountability proceedings, the central bank has issued a framework for dealing with loan frauds and red-flagged accounts (RFA), requiring banks to classify potential fraud accounts as RFAs based on observation or evaluation of early warning signals noticed.
 
Further, the minister says RBI has instructed banks to report deficient third-party services, such as legal search reports, property valuers' reports and collusion of these service-providers with fraudsters to the Indian Banks' Association (IBA), which maintains a caution list of such service-providers.
 
"For immediate reporting of financial frauds and to stop siphoning-off of funds by the fraudsters, Financial Cyber Fraud Reporting and Management System (FCFRMS) module has been made operational by the Indian cybercrime coordination centre, working under the Ministry of Home Affairs," the minister says.
 
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