Wednesday, December 30, 2020

With RBI harping on increased supervision, frauds decline in banking system

 

The recent collapse of PMC Bank due to fraud and deficient corporate governance "has dented public confidence in UCBs"



With the Reserve Bank of India (RBI) harping on increased supervision, frauds in the banking system have come down, the data shows. But “operational risk has emerged as a major source of risk.”
According to the Trends and Progress Report of the RBI, 98 per cent of frauds in terms of value were related to loans, and their occurrence was spread over several previous years.

“There was a concentration of large-value frauds, with the top fifty credit-related frauds constituting 76 per cent of the total amount reported as frauds during 2019-20.”

Further, “the banking relationship and date of sanction of credit facility in many of these accounts were much older,” the RBI said. Around 80 per cent of the frauds were reported by public sector banks, but their share in total reporting declined in 2019-20.

However, urban cooperative banks (UCBs) are seeing a rise in frauds. The recent collapse of PMC Bank due to fraud and deficient corporate governance “has dented public confidence in UCBs”, the RBI said.

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