With RBI harping on increased supervision, frauds decline in banking system


With the Reserve Bank of India (RBI) harping on increased supervision, frauds in the banking system have come down, the data shows. But “operational risk has emerged as a major source of risk.” According to the Trends and Progress Outline of the RBI, 98 per cent of frauds with regards to value were related to loans, and their occurrence used to be spread over several preceding years.

“There used to be a concentration of large-value frauds, with the top fifty credit-related frauds constituting 76 per cent of the complete amount reported as frauds all the way through 2019-20.”

Further, “the banking relationship and date of sanction of credit facility in many of these accounts were much older,” the RBI said. Around 80 per cent of the frauds were reported by public sector banks, but their share in complete reporting declined in 2019-20.

Alternatively, urban cooperative banks (UCBs) are seeing a rise in frauds. The recent collapse of PMC Bank because of fraud and deficient corporate governance “has dented public confidence in UCBs”, the RBI said.

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