In FY20 bank fraud doubled to ₹1.85 trillion: RBI report

Reserve Bank of India’s annual report, on Tuesday, revealed that frauds reported by banks of ₹100,000 and above value about ₹1.85 trillion in FY20.

The number of such cases increasing 28% in the same period and the amount doubled in value.

However, the date of occurrence of these frauds are spread over several previous years and are accounted for in the financial year when they are reported.

Data from the central bank also showed that a majority of these frauds are in loan portfolios of banks, both in terms of number and value.

Public sector banks accounted for 80% of the ₹1.85 trillion reported as frauds in FY20, followed by private sector banks at 18%. Frauds in loans constituted 98% of the total frauds or at ₹1.82 trillion.

Other segments like off-balance-sheet and cards or internet banking forms only a small part of it.

The average lag between the date of occurrence of frauds and their detection by banks and other financial institutions was 24 months during 2019-20.

However, the delay was even greater for large frauds of ₹100 crore and above with an average lag of 63 months.

“Weak implementation of early warning signals (EWS) by banks, non-detection of EWS during internal audits, non-cooperation of borrowers during forensic audits, inconclusive audit reports and lack of decision making in joint lenders’ meetings account for delay in detection of frauds,” said the report.

In the report, RBI warned of economic contraction till September.