Mudra Compass

Banking frauds in India are so frequent and rampant that they no longer surprise most people. In 2020-21, 229 frauds on average happened every day, revealed the Reserve Bank of India (RBI) in response to a Right to Information (RTI) query. The last financial year, 2020-21, during which more than 83,000 banking frauds took place that siphoned off Rs 1.38 lakh crore. The recoveries during the same period amount to a little over Rs 1,000 crore, less than one per cent of the outflow.

In 2020-21, 229 frauds on average happened every day.

One may, however, want to take some solace: this was a slight improvement over the figures from the previous financial year (2019-20) when the country witnessed 231 banking frauds every day.

In 2019-20, Rs 1.85 lakh crore was fraudulently taken away from banks and only 8.7 per cent could be recovered.

It has to be noted that Deloitte India conducted the study through compliance officers and senior management of 70 banks of all types and 78 per cent of the banks believe that banking fraud will increase in the next two years.

The study reveals that retail banking is going to be the biggest concern. Around 53 per cent of bankers admit they faced more than 100 frauds in retail banking, as per the study.

On Nov 19, 2019, Finance Minister Nirmala Sitharaman said in the Rajya Sabha that “Government has taken comprehensive measures to curb the incidence of fraud in banks” but her statement is not borne out by the statistics provided by the Reserve Bank of India in response to our RTI.

Due to the bank’s decision, sometimes banks give loans to those who have modus operandi of fraudulent mindset. In many cases some internal personnel have also been involved. The banking fraud leads banks towards the rise of NPA. The depositors have to ultimately face the problems when the bank is involved in some kind of fraud.

Recently The CBI has booked Ahmedabad-based Electrotherm (India) Ltd and its four directors for allegedly cheating Bank of India to the tune Rs 631.97 crore in connection with credit facilities taken during 2012-16, officials said.

The CBI has filed an FIR against Pranav Gupta and Vineet Gupta, co-founders of the Ashoka University, in connection with a case of an alleged bank fraud of Rs 1,626 crore involving their Chandigarh-based pharmaceutical company Parabolic Drugs.

The next is state-run lender Indian Bank announced it has reported over ₹266 crore worth of fraud to the Reserve Bank of India (RBI). The bank has reported three non-performing accounts as fraudulent, it said in a regulatory filing.

The list is really long but some top banking frauds are Satyam Computer, Kingfisher Airlines, Jet Airways, Bhushan Steel, PNB, ILFS, DHFL and PMC bank.

Beside this there are now online banking frauds which are one of the major issues.

With the significant rise in the use of digital systems over the years, there has been a rapid increase in cyber frauds around the world. Cyber criminals have grown much more sophisticated, making it more complicated for organizations to defend themselves against cyber threats. 

As technology advances, we rely even more heavily on the internet today. Everything we do can be done online including work, entertainment, shopping, and banking. The internet has made doing everyday tasks considerably easier.

However, it has also led to a drastic rise in cyber crimes around the globe. Seeing how Indians have started doing online banking transactions more now, the number of online banking frauds in India has increased substantially. According to the RBI’s annual report, bank frauds of ₹100,000 and above have more than doubled in value to ₹1.85 lakh crores in FY20 as compared to ₹71,500 crores in FY19. Also, the number of such cases has increased by 28% in the same period.