Mumbai: Public sector banks accounted for over 85% of total frauds reported in the banking system in 2017-18, according to the RBI’s financial stability report (FSR). The banking system reported 6,500 frauds, amounting to more than ₹30,000 crore.
“In recent years, frauds reported for amounts of over ₹1 lakh in the Indian banking sector show an increasing trend both in terms of number and quantum. In terms of the relative share of frauds, PSBs have a disproportionate share,” said the report.
While the bulk of the total frauds were loan related, card and internet banking frauds also contributed to the sharp rise, alluding to the underlying vulnerability of technology-based delivery channels.
The FSR also highlighted that fraud reported in PSBs under prompt corrective action (PCA) is in excess of their relative share in credit.
Poor credit screening and deficiency in oversight of the account by the lead bank have led to huge rise in frauds in state-owned banks. Noting that the operation risk oversight framework for public and private sector banks is not different, FSR said that difference in operational risk calls for a deeper introspection as to the effectiveness of the oversight of ‘processes’.
The FSR also pointed to significant information asymmetry between external auditors and internal stakeholders, and its consequences on the quality of internal oversight