IBA suggests FinMin for training sessions of bankers to handle fraud

The Indian Banking Association (IBA) has suggested to the finance ministry to direct public sector banks (PSBs) to organise regular training sessions by the Central Bureau of Investigation (CBI) for bankers to enhance vigilance and prevent fraud.

 

“We have seen a surge in frauds in recent times. For better coordination and to give more knowledge to the bankers to handle fraud-related situations, IBA has suggested to the finance ministry that PSBs may hold capacity-building sessions with CBI officials. Banks, on an individual basis, should invite CBI officials for some sessions,” a senior IBA official said.

 

The official also added that banks should establish a robust mechanism for the empanelment and de-empanelment of third-party agencies, particularly rating agencies, to ensure transparency, accountability, and reliability.

 

“This process should include clear criteria such as the agency's track record, methodology, regulatory compliance, and performance history,” the official added.

 

The number of frauds in the banking sector increased over four times in the past five years to 36,075. However, the amount involved came down significantly to about Rs 14,000 crore in FY24 from over Rs 1.85 trillion in FY20.

 

The Reserve Bank of India (RBI), in its latest annual report, said over the last three years, while private banks reported maximum number of frauds, PSBs continued to contribute most to the fraud amount. The number of frauds have predominantly been witnessed through digital payments (card or internet), rising from 2,677 in FY20 to 29,082 in FY24.

 

In terms of value, frauds have been reported primarily in the loan portfolio, which has witnessed a gradual decline to Rs 11,772 crore in FY24 from Rs 1.81 trillion in FY20. About 89 per cent of the frauds reported in 2023-24 by value occurred in previous financial years.

 

An official document, reviewed by Business Standard, showed that 1,078 cases of registration of FIR by CBI are pending. 

 

It further added that 868 complaints are pending from more than 24 months for FIR registration.

 

Earlier this month, the finance ministry held a meeting with PSB officials, other ministries, and investigative agencies, including the CBI, to discuss measures for expediting investigations into bank frauds. The ministry emphasised the need for enhanced cooperation between departments and agencies, which is expected to help resolve stressed banking assets more effectively.

 

The finance ministry further highlighted that frauds perpetrated by PSB staff have increased in recent months. From April, 2020, to September, 2024, there were 1,810 such incidents, involving Rs 1,820.74 crore. Under the RBI’s Master Direction on Fraud Classification and Reporting, banks are required to report cases involving their own employees to the CBI or local police if fraud is suspected. 

“Other operational issues related to filing of complaints with CBI in bank fraud cases, regular review of investigation and support required by CBI during investigation was also discussed. It was observed that regular discussion between bankers and CBI will bring in operational efficiencies in the investigation of bank fraud cases,” said the finance ministry statement. 

Tracking loss

 

> The number of frauds in the banking sector increased over four times in the past five years to 36,075

> The amount involved came down from Rs 1.85 trillion in FY20 to Rs 14,000 crore in FY24

> Digital payment frauds rose to 29,082 in FY24 from 2,677 in FY20