Private Banks Witnessed More Fraud Cases, But Public Sector Banks Lost More, Says RBI Report

The RBI Annual Report 2021-22 released on Friday showed that the number of frauds reported by banks and other financial institutions went up by 23.69 per cent, but in monetary terms, the losses due to fraudulent cases were down 56.28 per cent at Rs 60,414 crore.

The number of fraud cases were up from 7,359 cases in financial year 2020-21 to 9,103 cases in FY22. RBI data considers frauds of Rs 1 lakh and above.

The report also observed that the maximum number of frauds reported by the private banks was higher than those reported by public sector banks. However, in monetary terms, frauds in public sector banks were higher.

“An assessment of bank group-wise fraud cases over the last three years indicates that while private sector banks reported maximum number of frauds, public sector banks contributed maximum to the fraud amount,” the RBI annual report said.

Magnitude Of The Frauds

Private Sector Banks: Of the total banking frauds, 58.6 per cent (5,334 cases) were reported by private sector banks in FY22. These frauds accounted for a total monetary amount of Rs 17,588 crore, or 29.1 per cent of the total fraud amount.
“While the number of frauds reported by private sector banks was mainly on account of small value card/internet frauds, the fraud amount reported by public sector banks was mainly in loan portfolio,” the said RBI report said. 

• Public Sector Banks: Around 33.8 per cent (3,078 cases) of the total banking frauds were reported by public sector banks. These frauds collectively accounted for Rs 40,282 crore, or 66.7 per cent of the total fraud amount.
• Foreign Banks: 5.5 per cent (494 cases) of the total banking frauds were reported by foreign banks. These frauds collectively accounted for Rs 1,206 crore, or 2 per cent of the total fraud amount.
• Financial Institutions: Ten cases or 0.1 per cent of the total banking frauds were reported by financial institutions. These frauds collectively accounted for Rs 1,305 crore, or 2 per cent of the total fraud amount. Financial institutions reported 24 fraud cases in FY21 worth Rs 6,663 crore. So, when directly compared, the monetary amount of frauds for them have come down by 80.4 per cent.
• Small Finance Banks: This category of lenders reported 1.7 per cent (155 cases) of the total banking frauds. These frauds collectively accounted for Rs 30 crore or 0.04 per cent of the total fraud amount in the banking sector.
• Payments Banks: Just about 0.3 per cent (30 cases) of the total banking frauds were reported by payment banks. These frauds collectively accounted for Rs 1 crore or 0.001 per cent of the total fraud amount in the banking sector. Payment banks are fewer in number.
• Local Area Banks: This category too accounted for a mere 0.02 per cent (2 cases) of the total banking frauds. These frauds collectively accounted for Rs 2 crore or 0.003 per cent of the total fraud amount in the banking sector.
   

The Top Three Areas Of Fraud

The lion’s share of frauds in the banking sector occurred in loan advances-related cases, both in terms of the number of cases and the monetary value. A total of 3,839 cases or Rs 58,328 crore of the frauds were attributed to the loans and advances category. This represented 42.2 per cent of the total fraud cases.

At number two position were cards/Internet-related banking frauds, which constituted 39.5 per cent of the total number of frauds. These frauds were worth Rs 155 crore or 0.2 per cent of the total fraud amount in monetary terms. The number of fraud cases reported in this category was 3,596. These were worth Rs 155 crore and represented 39.5 per cent of the total fraud cases.

Frauds on cash-related transactions came at the third position, with 649 cases worth Rs 93 crore. This category represented 7.1 per cent of the total fraud cases.