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Fraud at India Banks: Top 8 banks accounts for nearly 50%

Seems RBI recently shared with finance ministry the fraud data recorded as part of its central fraud registry. Banks have to report the fraud incidents under various brackets to RBI, as part of FMR (fraud management report). RBI also maintains a central fraud registry which banks can access to detect a fraudulent borrower early on.

A few top snapshots:

  1. Seems no biases as per bank category. ICICI tops the volume of frauds reported followed by SBI and then we have SCB, BOB as well. So looks everyone is hit badly
  2. The top 8 banks accounts for 49% of the total fraud reported. Considering this has the biggest banks in India, it is not a great surprise
  3. From value perspective, the top 3 (SBI, PNB & Axis) accounts for 37% of the total value of frauds reported. All value figures in INR Crores
  4. Consider the fact that SBI estimated loss from Jan Dhan account is 4000 crore and FY16 write-off was around 15000 crore, fraud has a significant impact on the bank bottom line
  5. Employees involved in fraud is 450, which is heartening as on a %age basis, it is very miniscule compared to total employees of all banks together

What needs further investigation?

  1. Fraud category analysis. Unfortunately this data is not released (at least not as of date) to public and what we gathered earlier are from public news articles. The category of fraud (which tops the numbers and which one tops the value) can give much better clarity on what banks needs to target in terms of processes/ technology/ people failure points. We hope that the cumulative details will be analyzed by RBI and report be shared with banks
  2. Reporting sincerity. Since these are self reported data from the banks, there may be chances of variances in data being reported and is open to the banks interpretation/ sincerity.
  3. Status of frauds. The FMR reports (2 & 3) also captures several data with regards to status of the fraud and that will be interesting to study on %age that were closed effectively
  4. Fraud affinity relationships: Is there a geographical trend, or a customer age group trend or a transaction category wise trend (will surely be more around cards etc) that can be ascertained?

The latest data throws us back to our original article on fraud, where we had opined that with rising digitalization of banking transaction, we can expect increased incidences of electronic frauds. The stakes are high, considering the value involved in such frauds. We hope that the banks starts putting in more sophisticated & robust technology to prevent frauds.






SBI Investor analysis report FY1516, accessed from SBI website (https://www.sbi.co.in/portal/web/investor-relations/analyst-presentation)

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