Lok Sabha Question No. 2945 (UNSTARRED), answered on 2022-03-21
Subject: Increase in Banking Frauds
Ministry: FINANCE
Asked by: Thalikkottai Rajuthevar Baalu

## 2945. SHRI TR BAALU

Will the Minister of FINANCE be pleased to state:

- whether the Government concurs with the view that frauds will increase in spite of the many innovations that are adopted by various banks in capturing the maximum share of business through them; banking being
- () if so, the details of the remedial steps taken/being taken by the Goverment keeping in view the fact that the frauds may Crop up from different comners of the world either through fake accounts or fake bills which the banks may not be aware of until & certain of and point time;
- if not; the reasons therefor?

## GOVERNMENT OF INDIA MNSTRY OF FINANCE LOK SABHA UNSTARRED QUESTION NO-2945 ANSWERED ON 21/03/2022

## INCREASE IN BANKING FRAUDS

## ANSWER

## THE MNSTER OF STATE IN TH MNISTRY OF FINANCE

## (DR BHAGWAT KARAD)

(a) to (c): The Reserve Bank of India (RBI) has issued Master Directions on Frauds in 2016, and Government has instituted wide-ranging structural and procedural reforms to check frauds in banks. Such systematic and comprehensive checking for frauds, including of the stock of nonperforming assets (NPAs); led to unearthing of frauds perpetuated over the years. The improved detection and reporting accompanied with the comprehensive steps taken to check frauds have resulted in decline in the occurrence of such frauds, from Rs. 61,229 crore in the financial year 2016-17 to Rs. 11,583 crore in the financial year 2020-21, and to Rs. 648 crore the first nine months of the current financial year: legacy sharp during

Comprehensive steps that have been taken to prevent frauds in banks, include; inter-alia, the following:

- RBI has issued Master Directions on Frauds, which requires banks; to report frauds beyond a threshold amount to the police, monitoring and follow-up of cases by a committee, quarterly placement of information before Audit Committees of bank Boards, and annual review of  frauds by banks. These reviews cover;  inter alia, preventive measures, fraud   detection progress of investigation and recovery, and staff accountability: special
- (1) An online searchable database of frauds reported by banks, in the form of Central Fraud Registry, has been set up to enable timely identification; control and mitigation of fraud risk and also to carry out due diligence the credit sanction process\_ during
- For management of fraud risk and for early detection of loan frauds, prompt reporting to RBI and investigative agencies, and timely initiation of staff accountability proceedings,

RBI has issued a framework for requiring banks to classify potential fraud accounts as RFAs based on observation or evaluation of early signals noticed dealing warning

- RBI has  issued a circular to all banks in February 2018 tO implement   security and operational controls; such as straight-through\_process becween the banks core banking solution or accounting system and the SWIFT messaging system enable time-based restrictions in SWIFT, review at time-bound manner: logs regular
- 5) RBI has instructed banks to report deficient third-party services (such as legal search reports, property valuers reports, etc ) and collusion of these service providers with fraudsters to the Indian Banks' Association; which maintains & caution list of such service providers.
- A National Cyber Crime Reporting Portal has been launched by the of Home Affairs to enable to report incidents pertaining to all types of cybercrimes; and toll-free number   has also been   operationalised to get assistance in lodging online complints; Ministry public
- 6 Issuance by the Govemment in 2015 of Framework for timely detection, reporting; investigation etc. relating to value bank frauds to PSBs for with suspected frauds involving sum of money in excess of Rs. 50 crore. large 'dealing
- (8) For immediate reporting of financial frauds and to stop siphoning-off of funds by the fraudsters, Financial Cyber Fraud Reporting and Management System module has been made operational by the Indian Cyber Crime Coordination Centre, working under the
- The Indian Computer Emergency Response (CERT-IN under the Ministry of Electronics and Information Technology issues alerts and advisories regarding latest threats and countermeasures on basis to ensure safe usage of digital technologies; and is working in coordination with service providers, regulators and LEAs to track and disable phishing websites and facilitate investigation of fraudulent activities. Team cyber regular
- (11) Institution of comprehensive,, automated Early Warning Systems (EWS) in PSBs, with ~80 EWS triggers and use of third-party data for time-bound remedial actions.
- (10) Public sector banks  (PSBs) have been advised to strictly ensure rotational transfer of officials/ employees.