Lok Sabha Question No. 1222 (UNSTARRED), answered on 2022-07-25
Subject: Banking Fraud
Ministry: FINANCE
Asked by: Sunil Dattatray Tatkare, Subhash Ramrao Bhamre, Supriya Sadanand Sule, Kuldeep Rai Sharma, DNV Senthilkumar. S., Amol Ramsing Kolhe

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-1222

ANSWERED ON- 25/07/2022

## BANKING FRAUDS

1222. SHRI SUNIL DATTATRAY TATKARE DR. SUBHASH RAMRAO BHAMRE SHRIMATI SUPRIYA SULE SHRI KULDEEP RAI SHARMA DR. DNV SENTHILKUMAR. S. DR. AMOL RAMSING KOLHE

Will the Minister of FINANCE be pleased to state:-

- (a) whether even after effective steps taken by the Banking Sector and RBI both Public and Private  banks  have  failed  to  check  banking  frauds  in  the  country  and  if  so,  the  details thereof and the reasons therefor;
- (b) whether there has been unprecedented rise in banking frauds in the last three years and if so, the loss of the amount to the customers and banks due to such frauds, bank-wise;
- (c) the details of banking frauds unearthed and fund involved therein during each of the last three years and the current year, bank-wise;
- (d) the mechanism evolved by the banks to check the banking frauds and amount incurred in this regard during each of the last three years and the current year;
- (e) whether RBI has called any meeting of Public and Private Sector Banks to discuss rising banking frauds in the country and if so, the details and the outcome thereof along with the other corrective steps taken/proposed to be taken by the Government to keep a check on banking frauds and the achievements made in this regard; and
- (f) the amount of money recovered by the public/private sector banks as a consequence of legal actions initiated by banks during the said period?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

(DR. BHAGWAT KARAD)

- (a) to (c): As per Reserve Bank of India (RBI) data, the amount involved in frauds reported by Scheduled Commercial Banks (SCBs) and select financial institutions (FIs) based on the date of  occurrence of  fraud has declined from Rs. 32,178 crore in FY2019-20 to Rs. 11,800 crore in FY2020-2021 and to Rs 3,785 crore in FY2021-22. Bank-wise and year-wise details of number of frauds in SCBs, in respect of amount involved of Rs. 1 lakh and above in each fraud, by the year of occurrence, for the last three financial years are at Annex.

(d)  to  (f):  A s  per  RBI's  Master  Direction  on Frauds, banks are required to frame internal policy for fraud risk management and fraud investigation function, duly approved by their respective  Boards.  Further,  banks'  CEO,  Audit  Committee  of  the  banks'  Board  and  the Special Committee of the banks' Board are required to own the functions of the fraud risk management,  fraud  monitoring  and  fraud  investigation.  In  addition  to  this,  as  per  RBI instructions, banks are required to institutionalise comprehensive automated Early Warning System (EWS) to check the banking frauds. Public sector banks (PSBs) have institutionalised  the  same  with  ~80  EWS  triggers  and  enabled  use  of  third-party  data  for time-bound remedial actions.

Further,  as  per  inputs  received  from  RBI,  as  a  part  of  its  supervisory  review  process,  it discusses various concerns/ major issues flagged in the assessment report of the supervised entities including banks with their top management. Compliance to RBI guidelines issued to banks is examined on sample basis during the supervisory assessment of the banks and any non-compliances observed are taken up with bank concerned for rectification apart from initiating supervision/enforcement action against the bank, as deemed fit. Also, comprehensive  steps  have  been  taken  to  keep  a  check  on  the  banking  frauds  and  deter fraudsters, which includes, inter alia, the following -

- (i) 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 during the credit sanction process.
- (ii) 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 special 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  systems,  systemic  lacunae,  remedial  action, monitoring of progress of investigation and recovery, and staff accountability.
- (iii) 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 dealing with loan frauds and red flagged accounts (RFA), requiring banks to classify potential fraud accounts as RFAs based on observation or evaluation of early warning signals noticed.
- (iv) 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 fraud sters  to  the  Indian  Banks'  Association, which maintains a caution list of such service providers.
- (v) A  National  Cyber  Crime  Reporting  Portal  has  been  launched  by  the  Ministry  of Home  Affairs  to  enable  public  to  report  incidents  pertaining  to  all  types  of cybercrimes, and a toll-free number has also been operationalised to get assistance in lodging online complaints.
- (vi) 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 Ministry of Home Affairs.
- (vii) The  Fugitive  Economic  Offenders  Act,  2018  has  been  enacted  to  provide  for attachment  of  property  of  a  fugitive  economic  offender,  confiscation  of  such

offender's  property  and  disentitlement  of  the  offender  from  defending  any  civil claim.

- (viii) Heads of PSBs have been empowered to issue requests for issuance of Look-Out Circulars.
- (ix) Advisory  has  been  issued  by  Government  to  PSBs  to  decide  on  publishing photographs  of  wilful  defaulters,  in  terms  of  RBI's  instructions  and  as  per  their Board-approved policies.
- (x) PSBs have been advised to obtain certified copy of the passport of the promoters/directors  and  other  authorised  signatories  of  companies  availing  loan facilities of more than Rs. 50 crore.

Enabled  by  the  aforementioned  measures,  fraud  occurrence  as  percentage  of  gross advances, in SCBs, declined sharply from a peak of 1.05% in FY2013-14 to 0.02% in FY 2021-22.

With  regards  to  the  amount  of  money  recovered  by  banks,  RBI  has  informed  that  the specific information in this regard is not maintained by it. However, as p er the RBI's Annual Report  for  FY  2020-21,  frauds  have  been  predominantly  occurring  in  the  loan  portfolio, both in terms of number and value. Enabled by the measures taken by RBI/Government and legal actions taken by SCBs, they have recovered Rs. 4,02,567 crore, in non-performing assets  and  written-off  loan  accounts,  including  those  reported  as  fraud  in  the  last  three financial years.

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## Lok Sabha Unstarred question no. 1222, regarding Banking Frauds

Bank-wise  and  year-wise  details  of  number  of  frauds  in  SCBs,  in  respect  of  amount involved of Rs. 1 lakh and above in each fraud, by the year of occurrence, for the last three financial years

(amount in crore Rs.)

| Bank                                            | FY 2019-20   | FY 2020-21                   | FY 2021-22                   |
|-------------------------------------------------|--------------|------------------------------|------------------------------|
| Airtel Payments Bank Limited                    | --           | 0.97                         | --                           |
| American Express Banking Corp.                  | 7.17         | 10.46                        | 2.99                         |
| AU Small Finance Bank Limited                   | 0.88         | 1.98                         | 0.12                         |
| Australia and New Zealand Banking Group Limited | 125.53       | --                           | --                           |
| Axis Bank Limited                               | 1,803        | 47                           | 28                           |
| Bandhan Bank Limited                            | 2            | 8                            | 1                            |
| Bank of America, National Association           | --           | --                           | 6                            |
| Bank of Bahrain & Kuwait B.S.C.                 | --           | --                           | 5                            |
| Bank of Baroda                                  | 2,319        | 332                          | 570                          |
| Bank of India                                   | 1,026        | 222                          | 21                           |
| Bank of Maharashtra                             | 175          | 19                           | 5                            |
| Barclays Bank Plc                               | 121          | --                           | --                           |
| BNP Paribas                                     | 6            | --                           | --                           |
| Canara Bank                                     | 4,977        | 84                           | 29                           |
| Syndicate Bank                                  | 60           | Amalgamated into Canara Bank | Amalgamated into Canara Bank |
| Capital Small Finance Bank Limited              | --           | 0.04                         | --                           |
| Catholic Syrian Bank Limited                    | 3            | 8                            | 1                            |
| Central Bank of India                           | 309          | 6                            | 3                            |
| Citibank N.A                                    | 11           | 9                            | 3                            |
| City Union Bank Limited                         | 11           | 15                           | 5                            |
| Coastal Local Area Bank Limited                 | --           | --                           | 2                            |
| CREDIT SUISSE AG                                | --           | 250                          | --                           |
| DBS Bank India Limited                          | 213          | 41                           | 1                            |
| DCB Bank Limited                                | 9            | 8                            | 0.5                          |
| Deutsche Bank ag                                | 89           | 132                          | 0.07                         |
| Equitas Small Finance Bank Limited              | 3            | 16                           | 0.42                         |
| ESAF Small Finance Bank Limited                 | 0.32         | 0.70                         | 0.04                         |
| Federal Bank Limited                            | 496          | 24                           | 3                            |
| Fincare Small Finance Bank Limited              | 0.08         | 8                            | 0.48                         |
| Fino Payments Bank Limited                      | 2            | 0.53                         | 0.81                         |
| HDFC Bank Limited                               | 846          | 182                          | 61                           |
| Hongkong and Shanghai Banking Corpn. Limited    | 9            | 3                            | 2                            |
| ICICI Bank Limited                              | 1112         | 849                          | 121                          |
| IDBI Bank Limited                               | 778          | 114                          | 7                            |
| IDFC First Bank Limited                         | 35           | 29                           | 1                            |
| India Post Payments Bank Limited                | 0.46         | 0.38                         | 0.05                         |
| Indian Bank                                     | 924          | 657                          | 9                            |
| Allahabad Bank                                  | 9            | Amalgamated into             | Indian Bank                  |
| Indian Overseas Bank                            | 409          | 81                           | 96                           |

| Bank                                  | FY 2019-20   | FY 2020-21           | FY 2021-22           |
|---------------------------------------|--------------|----------------------|----------------------|
| Indusind Bank Limited                 | 312          | 591                  | 23                   |
| Jammu & Kashmir Bank Ltd              | 29           | 84                   | 0.40                 |
| Jana Small Finance Bank Limited       | 4            | 3                    | 4                    |
| J. P. Morgan Chase Bank National      | --           | 0.49                 | --                   |
| Association Karnataka Bank Limited    | 719          | 0.79                 | 1                    |
| Karur Vysya Bank Limited              | 458          | 20                   | 163                  |
| Kotak Mahindra Bank Limited           | 261          | 89                   | 35                   |
| Krishna Bhima Samruddhi Lab Ltd.      | --           | 0.01                 | --                   |
| Lakshmi Vilas Bank Limited            | 108          | 232                  | --                   |
| Nainital Bank Limited                 | 2            | 0.30                 | 0.07                 |
| North East Small Finance Bank Limited | 0.21         | 0.56                 | 0.09                 |
| Paytm Payments Bank Limited           | 0.01         | --                   | --                   |
| Punjab and Sind Bank                  | 1,921        | 159                  | 2                    |
| Punjab National Bank                  | 3,935        | 477                  | 2169                 |
| Oriental Bank of Commerce             | 18           | Amalgamated into     | Amalgamated into     |
| United Bank of India                  | 395          | Punjab National Bank | Punjab National Bank |
| RBL Bank Limited                      | 4            | 25                   | 2                    |
| SBM Bank (India) Limited              | 20           | 21                   | --                   |
| Shinhan Bank                          | --           | 100                  | --                   |
| Sonali Bank                           | 0.14         | --                   | --                   |
| South Indian Bank Limited             | 925          | 391                  | 32                   |
| Standard Chartered Bank               | 196          | 199                  | 28                   |
| State Bank of India                   | 696          | 4,038                | 200                  |
| Sumitomo Mitsui Banking Corporation   | --           | 0.30                 | --                   |
| Suryoday Small Finance Bank Limited   | 0.29         | 0.26                 | 0.24                 |
| Tamilnad Mercantile Bank Limited      | 39           | 148                  | 12                   |
| The Dhanalakshmi Bank Limited         | 0.44         | 0.31                 | 0.14                 |
| UCO Bank                              | 991          | 771                  | 91                   |
| Ujjivan Small Finance Bank Limited    | 2            | 2                    | 0.73                 |
| Union Bank of India                   | 2,923        | 450                  | 6                    |
| Andhra Bank                           | 54           | Amalgamated into     | Amalgamated into     |
| Corporation Bank                      | 0.22         | Union Bank of India  | Union Bank of India  |
| Utkarsh Small Finance Bank Limited    | 0.26         | 14 0.01              | 14 0.01              |
| Woori Bank                            | 0.20         | --                   | --                   |
| Yes Bank Limited                      | 2286         | 816                  | 1                    |

Source: Reserve Bank of India

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