Alleged bank frauds by Vijay Mallya, Nirav Modi, Mehul Choksi have hogged all the headlines over the last few years. But, from 2008 to 2019, the fraud cases at banks in India stand at a staggering 53,334. What's even more worrying is the time taken by banks to even detect the occurrence of fraud.
In its annual report for the financial year 2018-19, RBI revealed that fraud cases have gone up by 15 percent. In financial year 2017-18, 5,916 fraud cases were detected. This rose to 6,801 in financial year 2018-19.
The number of cases may have risen by 15 percent but the value of the frauds has risen by a whopping 74 percent. In the financial year 2017-18, frauds worth Rs 41,167 crore were reported. This number rose to Rs 71,543 crore rupees in financial year 2018-19.
The RBI did not spell out any potential reasons for the rise in fraud cases. After the Nirav Modi fraud came to light, the government had asked all bad loan cases of over Rs 50 crore to be investigated. CNBC-TV18 had then reported, citing banking sources, that even minor transgressions were being categorised as fraud.
The 74 percent rise in the value of bank frauds was reported in June 2019 after RBI responded to an RTI query. What was not known till today is the time taken by banks to detect fraud cases? The RBI annual report revealed that the average lag between the date of occurrence of fraud and its detection by banks was 22 months. But, banks are taking longer to report large fraud cases. 55 months, to be precise is the time taken to detect alleged fraud cases of over Rs 100 crore,
Large cases account for a lion's share of the overall fraud cases. The RBI report showed that out of the Rs 71,543 crore worth of cases, approximately Rs 52,200 were cases of over Rs 100 crore rupees. This is 73% of the total fraud cases. For comparison, smaller fraud cases of Rs 1 lakh account for just 0.1% of total fraud cases.
Government-owned banks saw a 68 percent rise in the value of fraud cases. Private banks saw an even sharper rise of 122 percent, but, the value of frauds remains very less compared to Govt-owned banks.
Govt-owned banks accounted for 90 percent of the total value of fraud cases and private banks accounted for just 8 percent. The remaining 2 percent is distributed between foreign banks, small finance banks, payment banks, local area banks and other financial institutions.
According to the RBI annual report, cheating and forgery were the major component for frauds, followed by misappropriation and criminal breach of trust. But with banks taking 5 years to even detect large cases of frauds, the burden on investigating agencies to bring the perpetrators to justice becomes tougher.