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.

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. 

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