The total cases of frauds (involving Rs 1 lakh and above) reported by banks/financial institutions increased by 28 percent by volume and 159 per cent by value during 2019-20, according to the Reserve Bank of India annual report. The date of occurrence of these frauds are, however, spread

over several previous years, the report said.

Frauds have been predominantly occurring in the loan portfolio (advances category), both in terms of number and value. There was a concentration of large value frauds, with the top fifty credit-related frauds constituting 76 per cent of the total amount reported as frauds during 2019-20, the annual report said.

Incidents relating to other areas of banking, viz., off-balance sheet and forex

transactions, fell in 2019-20 vis-à-vis the previous year

From the annual report:

"While the frauds framework focuses on prevention, early detection and prompt reporting, the average lag in detection of frauds remains

long. The average lag between the date of occurrence of frauds and their detection by banks/ FIs was 24 months during 2019-20. In large

frauds, i.e., Rs 100 crore and above, however, the average lag was 63 months. The sanction of the credit facility in many of these accounts was much

older.

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 delays in the detection of frauds. The EWS mechanism is getting revamped alongside the strengthening of the

concurrent audit function, with timely and conclusive forensic audits of borrower accounts under scrutiny."

First Published:Aug 25, 2020 12:04 PM IST