In value terms, the private banks have reported a rise of 35% y-o-y in frauds during FY21, and PSBs have reported a decline of 45% y-o-y in the similar period.
RBI said that banks may also ensure "compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.”
Even as number of fraud cases have declined in the banking system during 2020-21 (FY21), instances of frauds have increased in the private banks, RBI said in its annual report on Thursday. While private banks reported a rise of 21% year-on-year (y-o-y) in the number of frauds during FY21, public sector banks (PSBs) have reported a decline of 34% y-o-y during the same period. In value terms, the private banks have reported a rise of 35% y-o-y in frauds during FY21, and PSBs have reported a decline of 45% y-o-y in the similar period. Overall, the number of frauds in the banking system declined 15% y-o-y by number and 25% y-o-y in terms of value during FY21.
If an account is declared as fraud, banks need to set aside 100% of the outstanding loans as provisions, either in one go or spread over four quarters, as per RBI norms. According to data shared by the central bank, 59.2% of the total value of frauds were reported by public sector banks, followed by private sector banks at 33.5% during 2020-21. Last year, 80% of the total value of frauds were reported by public sector banks and 18.4% by the private sector banks.
As per RBI’s annual report, the average time lag between the date of occurrence of frauds and the date of detection was 23 months for the frauds reported in 2020-21. However, in respect of large frauds of Rs 100 crore and above, the average lag was 57 months for the same period. “In terms of area of operations, frauds have been occurring predominantly in the loan portfolio (advances category), both in terms of number and value,” , RBI said.
Among the key things which tops the agenda of RBI in FY22, the central bank is aiming at enhancement of fraud risk management system, including improving efficacy of early warning signal (EWS) framework. The regulator also wants to strengthen fraud governance and response system. This includes augmenting the data analysis for monitoring of transactions, introduction of dedicated market intelligence (MI) unit for frauds and implementation of automated unique system generated number for each fraud.
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