The Reserve Bank of India (RBI) in its annual report released on August 29th, 2018, has warned that the number of cases of fraud reported by banks has increased both in terms of numbers and value in 2017-18.
As per the report, the fraud cases which were generally estimated to be around 4,500 in the last 10 years, increased to 5,835 in 2017-18.
“Similarly, the amount involved in frauds was increasing gradually, followed by a significant increase in 2017-18 to Rs. 410 billion. The quantum jump in the amount involved in frauds during 2017-18 was on account of a large value fraud committed in the gems and jewellery sector, mainly affecting one public sector bank,” the report said.
Further, the public sector banks accounted for a major share in the loan category of frauds with 87%, followed by the private sector banks at 11%.
Issuing the warning, the RBI said that there is a need for improvement in the audit function and its governance.
“Many instances of repetitive and similar audit findings over the years were seen. Further, the internal audit could not detect many frauds, which came to light after accounts turned NPA,” the RBI said.
“Fraud detection and reporting, as well as preventive steps, need to be more risk-focused to identify red flags at an incipient stage,” the RBI added.