RBI says: Bank frauds on rise, especially in private sector banks

The Reserve Bank of India has pointed out that there has been increase in bank frauds, especially in the private banks, in comparison to public sector banks. More duplicitous game has been observed in the private banks. Therefore the customers have to be very careful with their bank deposits and banking transactions, particularly with private banks.

It has been observed that crores of rupees are being fraudulently with drawn from bank accounts or are being used deceitfully everyday. In a recent case, recklessness of a bank branch manager was highlighted in sanctioning housing loans for the purpose of flats. During the on spot verification the Central Bureau of Investigation (CBI) conducted on the request of the bank’s chief vigilance officer, it became apparent that the storeyed building was constructed as a hotel.

On further investigation it was found that the branch manager had also sanctioned many other housing loans against fictitious agreements of sale in fictitious names. By the time the investigation was completed the bank had lost around Rs 25 cr.

Mayur Joshi, chair-man of India forensic Research Foundation, a Pune-based consultancy which conducts fraud examination and forensic accounting in India said, "This is an alarming scenario. After all, it is people's hard earned money. Banks the world over keep a tight vigil as any slip will bring them down and even impact the economy."

According to information gathered by the CBI which Sunday ET is also having, bank frauds- investigated by the central investigation body values to around a crore or above – which has doubled in 2008-09 from Rs 659 cr in 2007-08 to Rs 1,404 cr.

The number of such frauds has also increased from 177 to 212. According to a CBI spokesperson "The focus is on expeditious completion of investigation, close follow up of under-trial cases to conclude them without delay." The CBI investigates through different wings like - the Anti-Corruption Bureau, Bank Securities & Fraud Cell and the Economic Offences Wing.

The central bank has also shown its concern over the rising number of frauds. An anonymous senior official of the bank told, "Its high time banks strengthen their fraud management practices. In their bid to quickly expand and grow, they are losing focus on risk control."

The RBI is very well aware of the rising trend. Last year, in September, it had pointed towards the senior management of banks for their failure in maintaining proper risk management mechanism. At that time, it had recommended banks to form a special committee chaired by their CEOs, who can supervise fraud investigation and make monitoring centralized instead of leaving completely to the regional centers.