Loan frauds surge to 90% in FY19

BENGALURU: Loan frauds as a percentage of total banking frauds jumped to 90 per cent in fiscal 2019 from 55 per cent in fiscal 2018 after regulatory standards were changed for banks reporting Non-Performing Assets (NPAs). Loan frauds increased year-over-year to Rs 64,548 crore in 2019 from Rs 22,558 crore, even as frauds in other segments — such as debit & credit cards, online banking and Forex — declined.

Interestingly, the share in these frauds of Public Sector Banks (PSBs) is as high as 90 per cent in terms of the amount lost. And for high-value frauds — that is, Rs 50 crore or more — the share of PSBs rose higher to 91.6 per cent. "This mainly reflects the lack of adequate internal processes, people and systems to tackle operational risks," the RBI said in a recent report.

It also said the "spike in the number of cases was because of the time period when banks chose to report the fraud, whereas the graph would be trending lower if analysed on the basis of the date of occurrence of the fraud". This could indicate a lag in reporting on the part of the bank or a delay in detecting the fraud.

The report also pointed out that the sharp spike in loan frauds this year was because of a change in regulations that called for tighter scrutiny of NPAs to ensure early detection of fraudulent loan accounts.