In the last two days DNA, Mumbai has published two articles
highlighting the current state of affairs in Banking Frauds in
India. The reports are based on an RTI application and reveal
the alarming state of affairs.
The first report from DNA which appeared yesterday (8th January)
revealed that Mumbai was the leading city in India in terms of
The second report which appeared today (9th January) has
indicated that ICICI Bank is a run away leader in the Fraud
share with nearly 50% of frauds being reported from the Bank.
In the financial year 2010-2011, Banks in Mumbai reported 787
fraud cases involving Rs 1049 crores followed by Delhi with 335
cases amounting to Rs 269 cores.
The exact nature of the frauds have not been revealed since RBI
refuses to acknowledge the break up. It is however expected that
the Phishing and retail banking frauds will be high at least in
number of cases.
What is also alarming is that the recovery rate of the fraud
amount is negligible. For example, in the last 5 years, out of
the total of Rs 1882 crores lost in Mumbai, only Rs 63 crores
In the case of frauds in loan accounts often committed by large
borrowers with influence and backed by corruption, Banks bear
the loss. However, in respect of genuine losses suffered by
retail customers through E banking vulnerabilities, customers
are bullied into believing that it is all their fault and they
should bear the losses.
Though RBI has instructed Banks to consider E banking frauds as
operational risks and obtain insurance, Banks ignore the
instructions and try to cut costs on security considering
customers as Guniepigs against whom insecure technology can be
The second report of DNA is even more alarming since it
identifies the Banks in which frauds are highest. First of all,
Private sector Banks which have around 25% of market share of
business seem to have nearly 80% of the share of frauds. In the
year 2010-2011, Public sector Banks reported 3700 cases of
frauds while the Private sector Banks reported 15700 frauds.
This shows a serious lack of fund security amongst the private
Amongst such Banks ICICI Bank appear to occupy the leading
position accounting for nearly 62% of the reported fraud cases.
Of the 5319 cases reported in the current year, 3304 cases were
from ICICI Bank. Recently one of the security professionals
posted a video showing how ICICI Bankís Internet Banking system
was vulnerable. The DNA statistics goes to prove that the
vulnerabilities have been exploited by the criminals. Since most
of the E banking frauds involve transfer of funds to fraudsters
accounts in the same bank, if there were 3000 Phishing cases in
ICICI Bank, there would be not less than 10000 fraudsterís
accounts with failed KYC. If RBI identifies these accounts
information about which would be readily available in the FMR
reports they would have to fine at least Rs 500 crores at the
rate of Rs 5 lakhs per KYC failure.
It is regrettable to note that even SBI which is the most
respected Bank in India has the dubious distinction of being the
leading public sector bank with frauds of Rs 298 crores reported
int he current year from 784 cases.
The reports raise serious questions to be answered both by RBI
as well as Banks such as ICICI Bank. Letís wait for their
January 9, 2012
Mumbai Leads :
ICICI Bank Leads