In a move to come down heavily on frauds, banks have compiled an extensive list of approximately 3,000 entities involved in fraudulent activities, which will be shared and updated in real-time, according to a report by The Economic Times. The list includes professionals such as lawyers, builders, and gold loan appraisers, among others, who are implicated in colluding to obtain loans through deceptive practices.
The report further cited a senior banking executive as saying that the issue was discussed in a meeting with the Advisory Board for Banking and Financial Frauds (ABBFF) last month, where it was decided that lenders would be required to consult this list before engaging with these entities, as well as continuously update it.
The list could expand further as banks adhere to the latest fraud classification guidelines issued by the Reserve Bank of India (RBI) on July 15.
Meanwhile, another bank official noted that during the meeting with ABBFF, it was highlighted that operational staff are not consistently checking the ‘caution list,’ which allows fraudulent entities to potentially re-enter the financial system. “Banks will be issuing internal directives to ensure full compliance,” the official added.
While banks typically take individual action against fraudulent entities, it was observed that these entities often manage to engage with other regulated entities (REs).
The consolidated list enables lenders to verify and avoid interacting with entities that have been flagged for banking fraud.
The Central Vigilance Commission (CVC) has instructed all public sector banks (PSBs), public sector insurance companies and public sector financial institutions to refer all fraud cases involving Rs 3 crore and above to ABBFF for guidance.
Additionally, the board has been granted the authority to periodically analyse fraud trends within the financial system and provide input for policy development to the RBI and CVC.
Banking sector fraud on the rise
Earlier in May, Business Standard reported that the number of banking frauds has surged over fourfold in the past five years, reaching 36,075 cases, though the total amount involved dropped significantly to approximately Rs 14,000 crore in FY24 from over Rs 1.85 trillion in FY20.
According to the RBI’s annual report, while private sector banks have reported the highest number of frauds over the past three years, public sector banks have contributed the most in terms of the total fraud amount.
The majority of fraud cases have been linked to digital payments, including card and internet transactions, with incidents rising to 29,082 in FY24 from 2,677 in FY20. In terms of value, frauds have predominantly occurred in the loan portfolio, where the amount has declined to Rs 11,772 crore in FY24 from Rs 1.81 trillion in FY20.
Notably, 89.2 per cent of the fraud cases reported in 2023-24 by value were related to incidents from previous financial years.
First Published: Sep 04 2024 | 10:48 AM IST
