Private Banks Face More Fraud, Public Sector Banks Exposed To Higher Amounts: RBI Report

While private sector banks have reported the maximum number of frauds over the last three financial years, their public sector peers contribute a larger share of the amounts involved in fraudulent activity.

Over FY23, private banks reported a total of 8,932 incidents of fraud involving Rs 8,727 crore, according to the Reserve Bank of India's annual report. On the other hand, public sector banks reported 3,405 such incidents, but the amounts involved were much higher at Rs 21,215 crore.

"Small- card/internet frauds contributed maximum to the number of frauds reported by the private sector banks, the frauds in the public sector banks were mainly in the loan portfolio," the report said.

At an overall level, the fraud amounts have registered a decline across private and public sector banks. RBI's analysis of vintage frauds reported during FY22 and FY23 shows a "significant time lag between the date of occurrence of a fraud and its detection... 94.5% of the frauds reported in FY23 by occurred in previous financial years," the report said.

The average ticket sizes of a fraud—going by back-of-the-envelope math—has also seen a notable reduction.

For private banks in FY21, for instance, 3,705 incidents of fraud were reported involving Rs 45,515 crore, placing the average fraud at Rs 12.2 crore. Consequently, in FY23, the average fraud fell to Rs 0.97 crore, denoting the rise of small-ticket frauds.

Similarly, for public sector banks, the average fraud has fallen from Rs 26.9 crore in FY21 to Rs 6.20 crore in FY23, according to RBI data.

The rise of small-ticket frauds is also visible in the sharp uptick seen in frauds that occur via cards or online payment methods. In FY23, a total of 6,659 incidents of fraud were reported over these channels, involving a total of Rs 276 crore.

Frauds involving advances continue to contribute to the largest amount exposed, but the overall rise in the number of incidents also sheds light on the changing nature of frauds in the banking system.

Although the overall amount exposed to advance fraud has reduced between FY21 and FY23, the number of such frauds registered an uptick between FY21 and FY23. Such incidents have risen from 3,476 in FY21 to 4,109 in FY23.