BENGALURU: From misuse of letters of credit, guarantee or undertakings to diversion and siphoning of funds, a variety of frauds linked to advances haunt the Indian banking system, indicating a lack of hygiene and risk frameworks.
While 86% of all frauds in India for 2016-17 are linked to advances, it was 99% at Punjab National Bank (PNB) which, experts say, points to collusion with insiders. Also, 26 banks reported that more than 97% of their frauds were advance-related, of which 15 peg it at 99% or more. Eight banks said such frauds account for 90%-95% of frauds.
Data of the Reserve Bank of India show that of Rs 23,903 crore lost to fraud in 2016-17, 86% (Rs 20,561 crore) was lost to advance-related fraud. In PNB, of Rs 2,808 crore lost to fraud, Rs 2,788 crore (99.3%) was linked to advances.
28% increase in cases
While RBI is compiling figures for 2017-18, data for three years ending March 31, 2016 show that 67% of total frauds were linked to advances, indicating a 28% increase. In 2016-2017, banks lost Rs 22,743 crore to fraud, of which Rs 15,238 crore was linked to advances.
According to experts and bankers, advances-related frauds are due to breach of trust and contract, and involve misuse of letters of credit or guarantees, submission of forged or fake documents to avail of loans and mortgaging of assets that don’t exist or have been pledged elsewhere, among other things.
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