Frauds related to banks, financial institutions shot up by 23%: RBI report

The number of frauds related to the banking sector has gone up but the total amount involved in frauds fell by more than half, says the Reserve Bank of India’s (RBI) annual report released recently.

The Reserve Bank of India stated that the number of frauds reported by banks (private, state-owned, foreign) and financial institutions went up by a whopping 23% in 2021-22.

During the financial year ending March 2022, banks reported about 9,103 frauds. In contrast, banks had recorded 7,359 frauds in 2020-21 and 8,703 in 2019-20.

On a positive note though, the amount involved in frauds in 2021-22 went down to Rs 60,414 crore, a big drop from over Rs 1.38 lakh crore reported in 2020-21 and Rs 1.85 lakh crore in 2019-20.

“An assessment of bank group-wise fraud cases over the last three years indicates that while private sector banks reported maximum number of frauds, public sector banks contributed maximum to the fraud amount,” the RBI annual report showed.

The RBI found that frauds have been happening mostly in the loan portfolio (advances category), both in terms of number and value.

The public sector banks reported 3,078 frauds in 2021-22, involving an amount of Rs 40,282 crore. In 2020-21 these banks reported 2,901 fraud cases and the amount involved stood at Rs 81,901 crore.

Meanwhile, the private sector banks reported a significant rise in the number of frauds. A total of 5,334 fraud cases were reported in 2021-22, much higher than 3,710 reported a year before. It may be noted that the total amount involved in these frauds was much lower at Rs 17,588 crore last year, in contrast to Rs 46,335 crore reported in the year before that.

Also read: RBI moots law to govern fintech sector, policy for digital banking

The private sector lenders reported most frauds on account of small value card/ internet frauds. In public sector banks, the fraud amount reported by public sector banks was mainly in loan portfolio.

The RBI report further stated: “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. 93.73 per cent of the frauds in 2021-22 by value occurred in previous financial years as against 91.71 per cent recorded in 2020-21.”