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Indian banks have been under-reporting frauds: RBI

Bank frauds numbers may not be startling, but the way they are reported is. In a staggering revelation indicating that Indian banks have been under-reporting frauds, the Reserve Bank of India has revealed that 90.6 percent of the frauds reported by banks in 2018-19 occurred between 2000 to 2018.

Data released by the banking regulator in its latest edition of the Financial Stability Report, suggests that nearly 40 percent of the under-reported frauds actually took place in three years between 2013 to 2016.

“The time-lag between the date of occurrence of a fraud and the date of its detection is significant,” the RBI said. ” It was observed that in many cases frauds being reported now were perpetrated during earlier years.”

As a fallout of this, the RBI is now reviewing its master direction on frauds and considering additional measures for timely recognition of frauds and enforcement action against violations, it added.

With regard to frauds reported, the relative share of state-run banks in the overall fraud amount reported in 2018-19 was in excess of their relative share in the credit. At the end of March 2019, share of PSU banks in overall fraud amounts reported was a whopping 96 percent against a banking industry average of 60.9 percent.

RBI also said that as on December 31, 204 borrowers who had been reported as fraudulent by one or more banks were not classified fraud by other banks despite having exposure to the same borrower.

“The reasons cited for delays in recognising frauds include delays in completing forensic audits or inconclusive findings of forensic audits,” the regulator said. “It is proposed to revise the Master Direction on Frauds in this regard and issue necessary guidance to banks.”

A comprehensive checking of legacy stock of non-performing loans across state-run banks during 2018-19 has helped unearth frauds perpetrated over several years and is leading to increased number of reported incidents of frauds in recent years, RBI explained.

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Banking/Finance-Industry-Economic Times

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