Indian banks reported a total of 13,530 frauds in FY23, sharply higher than 9,097 reported in FY22, according to the Reserve Bank of India’s annual report.
In value terms, however, the amount involved in frauds reduced to Rs 30,252 crore from Rs 59,819 crore in the previous fiscal.
“An assessment of bank group-wise fraud cases over the past three years indicates that while private sector banks reported maximum number of frauds, public sector banks continued to contribute the maximum to the fraud amount during 2022-23,” the report said.
Public sector banks recorded a total of 3,405 frauds during FY23 amounting to Rs 21,125 crore, lower than Rs 40,015 crore recorded in FY22. Private banks reported 8,932 frauds amounting to Rs 8,727 crore during FY23, lower than Rs 17,387 crore of frauds reported during FY22.
The Reserve Bank of India (RBI) said frauds have occurred predominantly in the category of digital payments which includes card or internet-based payment. In terms of value, frauds have been reported primarily in the advances category.
There was a 55% decline in the amount involved in the total frauds reported during FY22 over FY21. Proportionately, the decline in the total amount involved in frauds continued during FY23, with a reduction of 49% over FY22.
While small value card and internet frauds contributed maximum to the number of frauds reported by private sector banks, the frauds in public sector banks were mainly in loan portfolio, the RBI said.
An analysis of the vintage of frauds reported during FY22 and FY23 shows a significant time lag between the date of occurrence of a fraud and its detection, the RBI said.
“The amount involved in frauds that occurred in previous financial years formed 93.7% of the frauds reported in 2021-22 in terms of value. Similarly, 94.5% of the frauds reported in 2022-23 by value occurred in previous financial years,” the report added.
In order to improve data reliability in fraud monitoring returns (FMR) submitted by banks, lenders were advised to carry out proper due diligence and ascertain the involvement before including or adding names of the non-whole-time director in the FMR while reporting fraud or non-cooperative borrower.
During FY24, the RBI will conduct scenario analysis and provide input for system stress test, implement a fraud vulnerability matrix for lenders and strengthen the early warning signal and fraud risk management system, the report said.