Lok Sabha Question No. 2065 (UNSTARRED), answered on 2022-03-14
Subject: Bank Frauds
Ministry: FINANCE
Asked by: Kunwar Danish Ali

## GOVERNMENT OF INDIA MNISTRY OF FINANCE

## LOK SABHA UNSTARRED QUESTION NO-+2065 ANSWERED ON 14/03/2022

## BANK FRAUDS

## +2065. KUNWAR DANISH ALI

Will the Minister of FINANCE be pleased to state:

- the details of the number of cases of bank frauds each of the last five years and the current year; bankduring wise;
- whether  the   Government has asked banks to strengthen their fraud   risk management mechanism and whether incidents of fraud are on the rise despite it; and
- if so, the details thereof with the steps taken by the Government/ banks to remove security flaws and ensure proper investigation of banking frauds? along

## ANSWER

## THE MNSTER OF STATE IN TH MNSTRY OF FINANCE

## (DR BHAGWAT KARAD)

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 legacy stock of nonperforming assets (NPAs), led to unearthing of frauds perpetuated over the years. While such systematic and comprehensive checking has increased the annually reported amount involved in frauds; as reported to RBI by scheduled commercial banks (SCBs), 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 (FY) 2016-17 to Rs. 11,583 crore in FY2O2O-21,and to Rs. 648 crore the first nine months of the current financial year: As per RBI data, bank-wise and wise details of number of frauds in SCBs, in the last five financial years and the current financial year are at Annex: sharp during year

With regard to strengthening of fraud risk management; aS per RBIs 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; it is also stated in the said Direction that the fraud risk management; fraud monitoring and fraud investigation function must be owned by the bank's CEO, Audit Committee of the Board and the Special Committee of the Board.

Comprehensive steps have been taken to a check on frauds in banks, including, steps to address security flaws and to ensure investigation of such frauds. These steps, include, inter-alia, the following: keep

- 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
- RBI has issued Master Directions on Frauds, which banks, to report frauds beyond a threshold amount to the police;, monitoring and follow-up of cases by a committee; requires special
- 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
- RBI has issued a circular to all banks in February 2018 to implement security and operational controls, such as straight-through process  between the banks core solution or accounting system and the SWFT messaging system  enable time-based   restrictions in SWIFT, review at intervals, undertake reconciliation; etc. in a time-bound manner: banking regular
- For management of fraud riskand 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 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: dealing
- 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 launched by the Ministry of Home Affairs to enable to report incidents pertaining to all types of cybercrimes, and a toll-free Humber has also been operationalised to get assistance in lodging online complaints; been public
- Issuance by the Government in 2015 of "Framework for timely detection,  reporting, investigation etc to value bank frauds to PSBs for with suspected frauds involving sum of in excess of Rs. 50 crore. relating dealing money
- (8) For immediate reporting of financial frauds and to 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 working under the of Home Affairs. stop Centre, Ministry
- (10) Public   sector  banks   (PSBs) have been advised to strictly ensure rotational  transfer of officials/ employees.
- The Indian   Computer   Emergency Response Team (CERT-IN) under the   Ministry of Electronics and Information issues alerts and advisories regarding latest cyber threats and countermeasures on basis to ensure safe usage of digital technologies, and 1S in coordination with service providers, regulators and LEAS to track and disable phishing websites and facilitate investigation of fraudulent activities Technology regular working

In addition; measures   have also to deter fraudsters, which include; inter alia, the following:

- Heads of PSBs have been empowered to issue requests for issuance of Look-Out Circulars.
- The Fugitive Economic Offenders 2018 has been enacted to provide for attachment of property of a fugitivececonomic offender; confiscation of such' offenders property and disentitlement of the offender from defending any civil claim: Act,
- Advisory has been issued by Govemment to PSBs to decide on photographs of hing
- (v) PSBs have been advised to obtain certified copy of the passport of the promoters/ directors and other authorised signatories of companies loan facilities of more than Rs. 50 crore. availing

## Number of frauds reported by scheduled commercial banks in respect ofamount involved of Rs. 1lakh and above, by the year of occutrence

| Bank                                            | FY 2016-17   | FY 2017-18   | FY 2018-19   | FY 2019-20                      | FY 2020-21                      | FY 2021-22 to Dec: 2021) (up    |
|-------------------------------------------------|--------------|--------------|--------------|---------------------------------|---------------------------------|---------------------------------|
| Birla Idea Payments Bank Limited Aditya         |              |              | 24           |                                 |                                 |                                 |
| Airtel Payments Bank Limited                    |              |              |              |                                 | 58                              |                                 |
| American Express Banking Corp:                  | 170          | 337          | 226          | 163                             | 78                              | 37                              |
| AU Small Finance Bank Limited                   |              | 4            | 9            | 9                               | 8                               |                                 |
| Australia and New Zealand Banking Limited Group |              |              |              |                                 |                                 |                                 |
| Axis Bank Limited                               | 270          | 366          | 354          | 324                             | 481                             | 235                             |
| Bandhan Bank Limited                            | 39           | 45           | 47           | 22                              | 22                              |                                 |
| Bank of America, National Association           |              | 16           | 10           | 4                               | 2                               | 2                               |
| Bank of Bahrain & Kuwait BS.C                   | 2            |              |              |                                 |                                 |                                 |
| Bank of Baroda Dena Bank                        | 213          | 202          | 117          | 110                             | 80                              | 37                              |
|                                                 | 24           | 11           | 3            |                                 |                                 |                                 |
| Vijaya Bank                                     | 32           | 22           | 2            | Amalgamated into Bank of Baroda | Amalgamated into Bank of Baroda | Amalgamated into Bank of Baroda |
|                                                 | 123          | 144          | 129          | 73                              | 37                              | 19                              |
| Bank of Maharashtra Bank of Nova Scotia         | 63           | 63           | 80           | 28                              | 16                              |                                 |
| Barclays Bank Pl                                |              | 1            |              |                                 |                                 |                                 |
| BNP Paribas                                     |              |              |              | 1                               |                                 |                                 |
| Canara Bank                                     |              |              |              | 3                               |                                 |                                 |
| Syndicate Bank                                  | 83 179       | 104          | 94           | 52                              | 22                              |                                 |
| Capital Small Finance Bank Limited              |              | 169          | 78           | 37                              | Amalgamated into Canara Bank 1  |                                 |
| Catholic Syrian Bank Limited                    | 9            | 30           | 24           | 30                              | 58                              |                                 |
| Central Bank of India                           | 94           | 92           | 92           | 102                             | 73                              | 22                              |
| Citibank NA                                     | 190          | 209          | 275          | 247                             | 117                             | 52                              |
| Union Bank Limited City                         | 5            | 12           | 9            | 11                              | 15                              |                                 |
| Coastal Local Area Bank Limited                 |              |              | 1            |                                 |                                 | 5                               |
| Cooperatieve Rabobank UA                        |              | 2            |              |                                 |                                 |                                 |
| CREDIT SUISSE AG DBS Bank India Limited         |              |              |              |                                 |                                 |                                 |
| DCB Bank Limited                                | 2            |              | 9            | 6                               | 5                               |                                 |
| Deutsche Bank Ag                                | 2            |              | 10           | 14                              | 8                               |                                 |
| Doha Bank Qsc                                   | 1            | 8            | 5            | 9                               | 3                               |                                 |
| Equitas Small Finance Bank Limited              | 4            | 19           | 28           | 19                              | 27                              | 5                               |
| ESAF Small Finance Bank Limited                 |              | 5            |              | 8                               | 8                               |                                 |
| Federal Bank Limited                            | 25           | 45           | 45           | 36                              | 54                              | 16                              |
| Fincare Small Finance Bank Limited              |              | 2            | 19           | 4                               | 5                               |                                 |
| Fino Payments Bank Limited                      |              |              |              |                                 |                                 |                                 |
| Firstrand Bank Limited                          |              | 3            | 19           | 30                              | 23                              | 18                              |
| HFC Bank Limited                                | 352          | 1 395        |              |                                 |                                 | 151                             |
| Hongkong And Shanghai                           |              |              | 439          | 431                             | 311                             |                                 |
| Limited Banking Corpn:                          | 45           | 302          | 221          | 239                             | 139                             | 61                              |
| TCC Bank Limited                                | 557          | 557          | 488          | 664                             | 530                             | 518                             |
| IDBI Bank Limited IDFC First Bank Limited       | 146 13       | 146          | 176          | 150                             | 109                             | 51                              |
| India Post Payments Bank Limited                |              | 33           | 62           | 84                              | 50                              | 9                               |
|                                                 |              |              |              | 7                               | 2                               |                                 |

| Indian Bank                                     | 99   | 75   | 67   | 66   | 53                              | 24   |
|-------------------------------------------------|------|------|------|------|---------------------------------|------|
| Allahabad Bank                                  | 147  | 143  | 56   | 10   | Amalgamated into Indian Bank    |      |
| Indian Overseas Bank                            | 86   | 87   | 94   | 57   | 31                              | 12   |
| Indusind Bank Limited                           | 17   | 44   |      | 117  | 310                             | 377  |
| Jammu & Kashmir Bank Ltd                        | 13   | 12   | 10   | 4    | 2                               | 2    |
| Jana Small Finance Bank Limited                 | 13   | 15   | 32   | 57   | 28                              | 19   |
| Jpmorgan Chase Bank National                    |      |      |      |      | 1                               |      |
| Karnataka Bank Limited                          | 6    | 16   | 14   | 48   | 4                               |      |
| Karur Vysya Bank Limited                        | 22   | 30   | 23   | 24   | 4                               | 13   |
| KEB Hana Bank                                   | 2    | 1    |      |      |                                 |      |
| Kotak Mahindra Bank Limited                     | 135  | 289  | 383  | 652  | 826                             | 642  |
| Lab                                             | 3    |      |      |      |                                 |      |
| Ld Lakshmi Vilas Bank Limited                   | 53   | 43   | 49   | 31   | 5                               |      |
| Nainital Bank Limited                           | 10   | 4    |      | 5    | 4                               |      |
| North East Small Finance Bank Limited           |      |      | 2    | 3    | 6                               |      |
| Paytm Payments Bank Limited                     |      |      |      |      |                                 |      |
| Pt Bank Maybank Indonesia Tbk                   |      |      |      |      |                                 |      |
| Punjab and Sind Bank                            | 63   | 21   | 11   | 37   | 32                              |      |
| Punjab National Bank                            | 174  | 195  | 128  | 107  | 64                              | 35   |
| Oriental Bank of Commerce                       | 51   | 29   | 14   | 8    | Amalgamated into                |      |
| United Bank of India                            | 31   | 22   | 65   | 25   | Punjab National Bank            |      |
| RBL Bank Limited                                | 21   | 26   | 27   | 53   | 34                              |      |
| SBM Bank (India) Limited                        |      | 2    |      |      | 1                               |      |
| Shinhan Bank                                    |      |      |      |      | 2                               |      |
| Sonali Bank                                     |      |      |      |      |                                 |      |
| South Indian Bank Limited                       | 14   | 29   | 50   | 29   |                                 | 25   |
| Standard Chartered Bank                         | 320  | 96   | 91   | 227  | 113                             | 50   |
| State Bank of India                             | 751  | 923  | 931  | 673  | 283                             | 159  |
| State Bank of Bikaner And Jaipur                | 5    |      |      |      |                                 |      |
| State Bank of Hyderabad                         | 6    |      |      |      | Merged with State Bank of India |      |
| State Bank of Mysore State Bank of Patiala      | 12   |      |      |      |                                 |      |
| State Bank of Travancore                        | 15   |      |      |      |                                 |      |
| Subhadra Local Area Bank Limited                |      |      |      |      |                                 |      |
| Sumitomo Mitsui Banking                         |      |      |      |      |                                 |      |
| Corporation Suryoday Small Finance Bank Limited | 5    |      |      | 12   | 12                              | 2    |
| Tamilnad Mercantile Bank Limited                | 25   | 39   | 40   | 38   | 38                              | 2    |
| The Bank of Mitsubishi Ufj                      | 1    | 1    | 1    |      |                                 |      |
| The Dhanalakshmi Bank Limited                   | 11   | 8    | 19   | 4    |                                 |      |
| UCO Bank                                        | 45   | 59   | 82   | 139  | 95                              | 5    |
| Ujjivan Small Finance Bank Limited              | 15   | 11   | 13   | 27   | 20                              | 6    |
| Union Bank of India                             | 171  | 166  | 95   | 107  | 73                              | 33   |
| Andhra Bank                                     | 62   | 57   | 37   | 4    | Amalgamated into                |      |
| Corporation Bank                                | 55   | 20   | 12   |      | Union Bank of India             |      |
| United Overseas Bank Limited                    |      | 1    |      |      |                                 |      |
| Utkarsh Small Finance Bank Limited              | 5    | 8    | 10   | 5    | 8                               |      |
| Woori Bank                                      |      |      |      |      |                                 |      |
| Yes Bank Limited                                | 31   | 48   | 57   | 38   | 30                              | 10   |

Source: RBI