Bank frauds up 359% in four years at nationalized banks

The amount of money swindled by fraudsters from nationalized banks has jumped 359% in four years, RBI data revealed.

The trend at nationalized banks is in contrast to that at private sector banks and SBI, where frauds are being increasingly brought under control.

According to the RBI, nationalized banks lost a total of Rs 26,705 cr to frauds in the year ended March 2018, compared to Rs 2,374 cr lost by all private banks in India together.

SBI, which is not included in nationalized banks, lost another Rs 2,542 cr — more than the total amount lost by all the private banks put together (see chart).

In fact, going by the trend in the last four years, both the SBI and private sector lenders have been finding success in limiting the damage from fraud, while things seem to be going from bad to worse at non-SBI public sector banks, also known as nationalized banks.

SBI, for example, has seen a decline in the amount of money lost to fraud for two consecutive years, while private sector lenders have reported a fall in such losses in the last one year.

However, in the latest year alone, nationalized banks reported a 62% jump in losses due to fraud. Four years ago, these banks lost Rs 5,814 cr, which has risen steadily to Rs 26,705 cr as of FY18.

These losses are in addition to the estimated Rs 8.5 lakh cr that has been loaned to companies and others and has not come back.

Surprisingly, the number of instances of fraud has been largely stable across all category of banks.

Nationalized banks, for example, reported 1,879 such cases in FY14. This number rose only marginally to 1,902 cases by FY18, even as the total amount involved rose by 3.6 times, suggesting that frauds are becoming bigger and bigger.

Banks can be defrauded by a variety of means, including the hacking of their computer systems, or more commonly, by taking advantage of the credulousness of their customers.

Many hackers send emails warning bank customers that their credit card or online banking account has been blocked due to unauthorized transactions, and that they now need to log in by clicking on a link provided in the email.

The link usually points to a fake website designed to look like the real website, and the username and password entered by the user is recorded by the hackers.

Other types of fraud include the infamous ‘Jharkhand’ operation, through which gangs of criminals call people and try to convince them to divulge their ATM card number and one-time passwords.

Finally, many fake companies have taken large loans from banks based on forged documents.