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Banks See 73% Spike In Frauds In 2018-19

Banks have reported a 73 percent increase in incidents of fraud worth Rs 71,543 crore in 2018-19, a senior Reserve Bank of India official said.

Till March 2019, the top five, 10 and 100 cases of frauds cumulatively reported constituted 24 percent, 34 percent and 70 percent of all frauds respectively, a chief general manager with the RBI Jayant Dash said.

In 2017-18, the banks had reported frauds worth Rs 41,167 crore, he added.

"Total value involved in these frauds reported by the RBI-regulated entities during FY19 amounted to Rs 71,543 crore as against Rs 41,167 crore during the previous year, which is a 73 percent jump year-on-year," Dash told a CII event here.

The large value frauds which were worth Rs 50 crore and above constituted about 1 percent of the fraudulent cases but amounted to three-fourths of the fraud losses, Dash said.

He said the distribution of reported frauds by banks follow a high pareto principle also known as 80/20 principle, which means 80 percent of the consequences come from 20 percent of the causes.

Banks, on an average, report fraud loss of Rs 35,000 crore every year. "This does not take into account loss to investors and other financial and operational creditors, apart from the intangible losses to the system," he said.

The amount involved in frauds reported since financial year 2015 stood at Rs 1,74,798 crore, constituting a 211 percent of actual occurrence of frauds during the same period at Rs 82,959 crore, he said.

Noting that corporate fraud is rarely a one-step operation, he said, "the most expensive frauds are committed by management teams who have the ability to override control systems and collude to cover their tracks."

Addressing the same event, the Securities and Exchange Board of India’s Executive Director Anand Baiwar said there is a close link between corporate frauds and corporate governance.

"Effects of good corporate governance can be seen in terms of improved operating results and enhanced market capitalisation," Baiwar said.

Also read: Urjit Patel Admits RBI Was Slow To Take Timely Measures

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