Fraud on banks, more by the rich, says RBI’s K. C. Chakrabarty

BL :NEW DELHI, JULY 26:  2013

"When the times are good, the rich steal. When the times are bad, the poor people also steal. But this means rich people are stealing more," said K. C. Chakrabarty, RBI Deputy Governor.

“When the times are good, the rich steal. When the times are bad, the poor people also steal. But this means rich people are stealing more,” said K. C. Chakrabarty, RBI Deputy Governor.

An analysis of the frauds reported in the banking system over the last two decade shows that the number of frauds had not gone up significantly, but the quantum has increased manifold.

Loan-related frauds are a major concern for the central bank, Chakrabarty said.

The number of reported frauds in the banking system over the last 10 years was 1,76,547, and valued at Rs 31,400 crore, he added. In the last 25 years, a mere 61 fraud cases (involving Rs 50 crore or more in each case) accounted for a whopping Rs 13,000 crore, through 208 bank accounts.

It is not transaction-related frauds (like credit/debit card, and so on) that are a worry, but loans-related ones, rued Chakrabarty at an Assocham conference on ‘Financial Frauds’ in the Capital on Friday.

“Majority of the frauds are wrong sanctions at the highest level of the banks. The problem is we are not able to take definite action in definite timeframe.”

The Deputy Governor expressed disappointment that banks were indifferent to monitoring large frauds and whatever fraud reporting was happening, was in silos.

Some of the reporting of frauds in large transactions happened only after they had been recognised as non-performing assets, he said.

Chakrabarty also stressed the need for a proper definition of ‘fraud’ in the banking system. At the same time, he said banks should not get confused between “loss” and “fraud”.

(This article was published on July 26, 2013)