Bank frauds rise 72% in 2017-18 to Rs 412 bn; PNB scam biggest cause: RBI

Public sector banks accounted for a majority of frauds during the year

Frauds in the banking industry increased by 72 per cent to Rs 412 billion in 2017-2018, against Rs 239 billion in the previous year. This jump was mainly on account of the Rs 140 billion Punjab National Bank (PNB) fraud, said a report by the Reserve Bank of India (RBI) on Friday.   

The number of fraud cases stood at 5,917 cases in 2017-18 against 5,076 cases in 2016-2017. This was a rise of 16.5 per cent over the previous year with an incremental 841 cases.

The number of fraud cases reported by banks was generally hovering at around 4,500 in the past 10 years before their increase to 5,835 in 2017-18, said RBI's annual report released in August.

The rise in frauds in 2017-2018 was mainly on account of the rise in the value of frauds. "Incidentally, large value frauds involving Rs 500 million and above constituted about 80 per cent of all the frauds during the year," said the RBI.

"The quantum jump in the amount involved in frauds during 2017-18 was on account of a large value fraud committed in gems and jewellery sector, mainly affecting one public sector bank (PSB)," said the central bank. This refers to the Nirav Modi-PNB scam. 

While 90 per cent of frauds were located in the credit portfolio of banks previously, frauds related to off-balance sheet operations, foreign exchange transactions, deposit accounts and cyber-activity took the centre stage in 2017-2018, said the report.

Public sector banks (PSBs) accounted for a majority of frauds during the year. During 2017-18, PSBs accounted for 92.9 per cent of the amount involved in frauds of more than Rs 0.1 million, as reported to the Reserve Bank, while the private sector banks accounted for six per cent. With regard to the cumulative amount involved in frauds till March 31, 2018, PSBs accounted for around 85 per cent, while the private sector banks accounted for a little over 10 per cent, according to the report.