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Private Banks Have Most Frauds, But PSU Banks Get Hit For The Largest Amount

Gautam Jagannathan2 min read
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What is "Private Banks Have Most Frauds, But PSU Banks Get Hit For The Largest Amount" about?
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General
Who wrote this article?
Gautam Jagannathan, Capitalmind's research team.
When was this article published?
Published 27 August 2014.
How long does this article take to read?
2 min read

Data from RBI Deputy Governor, K C Chakrabarty’s speech to analyse the numbers behinds Financial Frauds that were committed.

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On a year-on-year basis, we can see that the number of frauds are definitely reducing; 24,791 in 2009-10, to 13,293 for 2012-2013. Seems healthy.

But hang on! Look at the actual rupee value of these frauds over the last couple of years; it has been steadily but surely rising. Up from Rs. 2,037.81 cr. to** Rs. 8,646 cr** over the same period. That’s a CAGR of 43.52%! So it could be that our supervisory system is becoming really potent at picking out the smaller frauds, but are missing out on the really large ones. Look at it this way:

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Truly staggering to think about it; the defrauders are now 8 times more potent than they were 4 years ago!

Now we might be inclined to dis-regard these numbers thinking, hey that’s just a small number when you’re talking about banks; what is Rs. 65 lakhs or even a crore to them! Remember, these frauds affect any person who avails a bank’s services, that is the common man (Aam Aadmi to echo last year’s flavour of the season). Such numbers make huge difference to a single individual, and as such cannot be taken lightly.

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Let’s dissect these numbers further, to see how individual participants in the banking industry have done (or ‘not done’ depending on how you view frauds):

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Of the total 1,69,190 cases involving the banking sector:

  • Nationalised Banks (there are 26 of them incl. SBI and its associates) accounted for 17.53% (29,653 incidents). However, the value of these incidents amounted to** 83.01%** of the total, i.e. Rs. 24,828 cr. The massive scale of nationalised banks pretty much ensures that frauds typically are of very large sizes; these guys had an average fraud per case of Rs. 83.73 lakhs! Truly behemoths in this criterion as well.

  • Old Private Sector banks (there are 13 of them) reported 2,271 such cases (1.34%). Again, the average fraud per case was very high at Rs. 75.20 lakhs, resulting in them accounting for a share of** 5.71%** of the total fraud amount.

  • New Private Sector Banks (there are 6 of them) had 91,060 incidents; that’s 53.82%! However, the average fraud per case was much smaller (Rs. 2.35 lakhs) and hence these guys contributed just 7.16% to the total fraud amount.

  • Foreign Banks (there are 43 of them) had** 46,206** cases (27.31%). Again, the average fraud per case was lower at Rs. 2.67 lakhs, bringing their contribution to just 4.12% of the total amount.

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