Various government sector banks have managed to put their processes in order following the multi-billion dollar Punjab National Bank scam. All these PSU Banks have determined to learn a lesson.
More than double the overall 15% decline in scams in the banking operation, for fiscal 2020-21, the number of scams in PSBS declined 34%. Also, according to the RBI yearly report for fiscal 2021, frauds in private banks grew 21% during the period. From 80% in fiscal 2020, the share of PSBs in total fraud value shrank to 59.2% this financial year, while private sector banks grew to 33.5%. A percentage of 18.4% was reported by the private banks in fiscal 2020.
The RBI reported a total of 7,363 frauds worth Rs 1,38,422 crore across All Banks and areas of operations.
Online frauds Rise
By the end of March 2021, the number of scams in the online space shot up 34.6%, out of which 99% of the total scams reported in the fiscal year gone by were from the advances category in value terms. Distinctly, the incidence of frauds in the advance category has come down over the previous year, whereas the value of scams in the advances category remained almost the same as last year.
As far as value is concerned, a rise of 35% y-o-y in frauds was recorded through FY21 by private banks, and a decline of 45% was reported by PSBs.
The remaining time between the time of the crime and the date of acquisition was 23 months for fraudsters reported in 2020-21. However, in the case of a massive fraud of $ 100 million or more, the average was 57 months of the same period. Concerning the workplace, fraud was most prevalent in the loan portfolio (Advances category), both in terms of value and value, the RBI said.
Reducing frauds
Improving the efficacy of the early warning signal (EWS) framework, fraud governance, and response system is currently a priority for the central bank to enhance the fraud risk management system.
This includes:
- Data analysis augmentation for transactions monitoring
- Dedicated market intelligence (MI) unit for frauds
- Implementation of unique automated system-generated numbers for each scam.
Spread over up to four quarters, 100% provisioning of the outstanding loans has to be made by the banks for an account declared fraud.