Relevance: GS-III (Banking, Financial Governance) | The hindu; Source: Reserve Bank of India – Trend and Progress of Banking Report

What is the Issue?

The Reserve Bank of India has reported a decline in the number of bank fraud cases, but a sharp rise in the total amount involved, pointing to a shift towards fewer, high-value frauds, mainly in large loan accounts.

Key Findings

• Fraud cases: Declined due to improved detection and digital safeguards.
  
• Fraud amount: Increased sharply due to large advance-related frauds.
  
• Digital frauds: High in number but low in value.
  
• Loan frauds: Low in number but dominate total losses.
  
• Re-reporting followed the Supreme Court (2023) mandate on due process in fraud classification.
  

Why This Matters

• Indicates weak credit appraisal and post-sanction monitoring in big loans.
  
• Highlights concentration of systemic risk in corporate lending.
  

Regulatory Framework to Curb Bank Frauds

• Master Directions on Frauds (RBI): Time-bound detection, reporting and classification.
  
• Early Warning Signals (EWS): Red flags in loan accounts.
  
• Central Fraud Registry: Information sharing among banks.
  
• Know Your Customer and Anti-Money Laundering norms: Under the Prevention of Money Laundering framework.
  
• Technology tools: Artificial intelligence-based transaction monitoring and real-time alerts.
  

Q. With reference to bank frauds in India, consider the following statements:

1. Loan-related frauds account for a larger share of fraud value than digital frauds.
   
2. The Central Fraud Registry is maintained by the Reserve Bank of India.
   

Which of the statements given above is/are correct?