Banking Fraud History in India
Over the years, India has seen several headline-making bank frauds. Yet bank frauds and the billionaire bad boy, Vijaya Mallya, go hand in hand. The Kingfisher chief, charged with fraud and money laundering of a whooping 90 billion rupees, fled to the UK. In another case, Vikram Kothari, the Rotomac Pens founder, and chairman, had been alleged to have of loan default of 36 billion rupees. The Central Bureau of Investigation later arrested him and his son Rahul Kothari in Delhi. The Gujarat-based diamond merchant Jatin Mehta was no less, as he is referred to as one of India's biggest defaulters. He owned Winsome Diamonds and was charged with a default of more than 65 billion rupees to a consortium of Indian banks.
A commendable decline in fraud cases
The decline in the number and frequency of fraud cases over the last few years has been the limelight for India's finance and banking sectors. In comparison to the improved yet massive fraud count worth 1.05 lakh crore rupees last year, FY22 has made a commendable effort at limiting them to 41 thousand rupees. Official data highlights the low number of fraud cases in FY22, with a difference of around 150 cases, compared to last year.
What did the banks do different
The reports say that the total number of fraud cases constituting over 100 crore rupees in private sector lenders decreased to 38 in FY22 from 98 in FY21 and 80 for public sector banks (PSBs). So what was different this time? RBI says that over the past few years, they have been working and are continuing to work hard and mitigate the number of banking fraud cases. Early Warning System enhancement, applying coming-of-age data analysis techniques to monitor transactions, dedicating a special Market Intelligence for the sole purpose of frauds, etc., have led to this sharp decline. Machine Learning was applied to check the effectiveness of EWS, RBI added. They went ahead with extensive research of applying EWS structure in filtered Scheduled Commercial Banks only, in collaboration with the Reserve Bank Information Technology Private Limited (ReBIT).
"Such systematic and comprehensive checking of frauds, including of the legacy stock of non-performing assets (NPAs), led to the unearthing of frauds perpetrated over the years," Minister of State for Finance Bhagwat Karad said. However, the increase in the system effectiveness and awareness coupled with the benefits of Machine Learning and Artificial Intelligence has resulted in a commendable decline in the number and frequency of fraud cases. Yet the downside is that the reported annual amount involved in those fraud cases has increased.
Future Scope and Improvements
Even though the hard work has yielded positive results, some bullet points are yet to be taken care of in order to lessen both the frequency and amount involved in fraud cases. Increasing checks all-round, evaluating and addressing security flaws, issuing circulars to all banks with stricter and effective rules, etc., are some of the primary fields being addressed.
"For immediate reporting of financial frauds and to stop siphoning off of funds by fraudsters, Financial Cyber Fraud Reporting and Management System module has been made operational by the Indian Cyber Crime Coordination Centre, working under the Ministry of Home Affairs," Karad said.
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