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Loan fraud rises to 90% in FY19

By on March 11, 2021 0
BELGALURO: Loan fraud as a percentage of total bank fraud jumped to 90% in fiscal 2019 from 55% in fiscal 2018 after regulatory standards were changed for banks reporting impaired assets (NPAs). Loan fraud increased year on year to Rs 64,548 crore in 2019 from Rs 22,558 crore, although fraud in other segments, such as debit and credit cards, online banking and forex – refused.
Interestingly, the share of these public sector bank (PSB) fraud reaches 90% in terms of lost amount. And for high-value fraud, i.e. Rs 50 crore or more, PSB’s share has risen to 91.6%. “This primarily reflects the lack of adequate internal processes, people and systems to address operational risks,” the RBI said in a recent report.
He also said that “the spike in the number of cases is due to the length of time banks have chosen to report the fraud, while the graph would be lower if analyzed by the date the fraud occurred.” This could indicate a delay in reporting by the bank or a delay in detecting fraud.
The report also pointed out that the sharp spike in loan fraud this year was due to a change in regulations that required tighter scrutiny of NPAs to ensure early detection of fraudulent loan accounts. “In February 2018, the government issued a framework for early detection, reporting and investigation of PSB fraud, which required them to evaluate NPA accounts above Rs 50 crore from the perspective of possible fraud, to complement previous efforts to expose fraudulent transactions. This appears to have caused the sharp increase in reported fraud, “notes the report.

Another concern is the rise in fraud in the retail loan segment, traditionally considered a low-risk segment. Bankers said that the trend of five-minute instant online loans, same-day loans, etc.
On the plus side, cases of people losing money due to debit card skimming at ATMs or PoS, online banking fraud, and others have gone downhill. Internet / card fraud decreased 35% to Rs 71crore, indicating the RBI’s push for banks to switch from magnetic stripe to EMV chip-based cards, which are more secure, have worked in fraud prevention.
The report also showed that deposit fraud also tended to drop to Rs 147 crore from Rs 457 crore a year earlier, indicating that banks are enforcing stricter KYC rules to prevent money laundering, round trip and others. fraud.

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