The number of bank frauds decreases to 6,735 in 2018-19: finance minister

NEW DELHI: The incidence of bank fraud involving more than Rs 1 lakh was reduced to 6,735 in 2018-19 compared to 9,866 in the previous fiscal, the Parliament was informed on Tuesday.

During 2018-19, there were 6,735 fraud incidents with financial implications of Rs 2,836 crore compared to 9,866 such activities involving more than Rs 4,228 crore a year ago, finance minister Nirmala Sitharaman said in a written response to the Rajya sabha .

The occurrence of fraud was enabled by the lack of discipline in the financial system and a lax credit culture, he said.

Previously, the credit culture and discipline in the financial system were lax among various stakeholders. Shell companies for layered operations to divert funds, control assets and continuous access to funds despite non-compliance or being a fugitive abroad, unavailability of passport details and, he added. The powers to issue observation circulars with banks, and the lack of assured verification of voluntary default and fraud in cases of high-value NPAs, led borrowers to believe that they could get ahead with noncompliance, voluntary default or even the fraud, he added.

The role of bankers was not so rigorously examined before, and auditors were not regulated independently, the minister said.

Through extensive reforms, a change in the credit culture has been instituted and discipline has been reinforced for each party interested in the financial system, which has allowed a decrease in the occurrence of fraud, said Sitharaman.

The minister also said that the RBI has issued comprehensive instructions regarding security measures and mitigation of risks related to electronic or digital transactions, including steps to secure card transactions such as online alerts for all transactions, certification of commercial terminals and conversion of all existing magnetic stripe cards to EMV chip and PIN cards

Answering another question, the finance Minister He said that the proportion of unprofitable gross assets (GNPA) to the gross advances of the banks as of March 31, 2017, 2018 and 2019 (provisional data) was 9.3 percent, 11.18 percent and 9.08 percent, respectively.

Public sector banks have been recapitalized for Rs 3.19.497 million years during the last five financial years from 2014-15 to 2018-19, including the recapitalization of Rs 1.30,225 during financial year 2018-19, he said.

During the last four financial years, the minister said that the PSBs were recapitalized to the point of Rs 3.12 lakh crore, with the infusion of Rs 2.46 lakh crore by the government and the mobilization of more than Rs 0.66 lakh crore per se.

Replying to a separate question, Sitharaman said, the RBI has powers under other laws as well, which include, the power under section 12 of the Currency management law , 1999 to inspect compliance with the Law and regulations, etc.

The RBI also maintains that the Central Repository of Information on Large Credits (CRILC) on aggregate fund-based and non-fund-based exposures of Rs 5 crore and above of all banks, she said.

Further, she said, the RBI maintains the Central Fraud Registry and banks report all frauds involving amount above Rs 1 lakh to the apex bank.

In addition, the RBI 's master directions on frauds lay out guidelines on categorization, reporting and review of frauds, along with rules for consequent provisioning, she said.

The powers of RBI are wide-ranging and comprehensive to deal with various situations that may emerge in all banks, including public sector banks. The improvement in regulatory functioning being an ongoing process, government deception with RBI and discusses issues as they evolve, she said

In reply to another question, the finance Minister said Asian Infrastructure Investment Bank (AIIB) has approved seven projects in India for an amount of $ 1.91 billion as of now.