Frauds reported in H1 rise to Rs 1.13 trillion, 97% happened earlier

Lenders reported frauds of Rs 1.13 trillion in the first half of financial year 2019-20 (H1FY20) and 97.3 per cent of these took place in previous years, depicting a significant time lag between the occurrence of fraud and its detection, revealed the FSR. The amount was Rs 71,543 crore in FY19.

“The amount involved in frauds that occurred between FY01 and FY18 formed about 90.6 per cent of the frauds reported in 2018-19 in terms of value. Similarly, 97.3 per cent of the frauds reported in H1FY20 by value occurred in previous financial years,” said the report, released by the Reserve Bank of India (RBI) on Friday.

The number of frauds reported in H1FY20 was 4,142 and 6,801 in FY19.

Frauds reported in H1 rise to Rs 1.13 trillion, 97% happened earlier

Loan-related frauds continued to dominate in aggregate, forming 90 per cent of all frauds reported in FY19 by value and 97 per cent of all frauds reported in H1FY20 by value. As much as Rs 70,046 crore worth of loans were reported as fraudulent in H1FY20, while fraudulent deposits was to the tune of Rs 417 core and fraudulent foreign exchange transactions was about Rs 52 crore.

Also, during the first half of FY20, banks reported 398 cases of large-value frauds (above Rs 50 crore) worth Rs 1.05 trillion and 21 cases of frauds above Rs 1,000 crore, worth a cumulative Rs 44,951 crore.

The RBI has said that it is taking steps to integrate fraud reporting of NBFCs and urban co-operative banks in its central fraud registry database. “Such interlinking would serve as an invaluable resource in effective fraud detection/monitoring. In addition, a greater thrust has been put on improved governance,” it said.

Apart from this, the central bank has sharpened its focus on a fraud response plan that is being sought from banks and for this, stricter timelines and clear guidance with respect to reporting of frauds and declaration and processing of red-flagged accounts will be prescribed.

“Banks are required to set up specialised units to make use of market intelligence and data analytics and also put in place transaction monitoring system. In order to bring clarity, the role and scope of forensic audit along with timelines is also being examined,” the RBI said.

Bank frauds rise to Rs 1.13 trn in H1 FY20 due to detection delay: RBI

Frauds reported by banks during the first half of the current fiscal touched an all-time high amount of Rs 1.13 trillion, owing to delay in detection by lenders, according to an RBI report.

This involved 4,412 fraud cases of Rs 1 lakh and above, as per the report.

In FY19, banks had reported 6,801 cases of fraud involving Rs 71,543 crore.

"An analysis of the vintage of frauds reported during the FY19 and H1 FY20 shows a significant time-lag between the date of occurrence of a fraud and its detection," RBI's Financial Stability Report said.

The amount involved in frauds that occurred between FY01 and FY18 formed about 90.6 per cent of the frauds reported in 2018-19 in terms of value.

Similarly, 97.3 per cent of the frauds reported in the first half of FY20 by value occurred in previous financial years.

During the first half of 2019-20, banks reported 398 cases of large value frauds (above Rs 50 crore) worth Rs 1.05 trillion.

Lenders reported 21 cases of frauds above Rs 1,000 crore, worth a cumulative Rs 44,951 crore.

The report said loan-related frauds continued to dominate in aggregate, constituting 90 per cent of all frauds reported in FY19 by value and 97 per cent of all frauds reported in H1 FY20.

The Reserve Bank is taking steps to integrate fraud reporting of NBFCs and urban co-operative banks in its central fraud registry database.

Such interlinking would serve as an invaluable resource in effective fraud detection/monitoring, it said, adding, "a greater thrust has been put on improved governance."

Special emphasis is being given towards specific expectations on board/ its committees and senior management towards fraud management.

A sharpened focus on fraud response plan is being sought from the banks and for this, stricter timelines and clear cut guidance with respect to reporting of frauds and declaration and processing of red flagged accounts (RFAs) will be prescribed, the report said.