State-run banks see jump in loan fraud

Lenders see a sharp increase in non-performing assets on account of forgery and fraud

State-owned banks are seeing a sharp jump in non-performing assets on account of forgery and fraud even as they struggle to cope with bad loans from distressed commodities and infrastructure sectors.

Bad loans extended on the basis of fake documents and outright cheating, soared to almost Rs.13,000 crore in 2015-16, more than double the amount two years ago and more than 16 per cent higher than the Rs.11,125 crore recorded in 2014-15, official data showed.

While Canara Bank recorded a 12-fold jump in fraud-triggered non-performing assets (from Rs.131.6 crore in 2014-15 to Rs.1,584.3 crore in 2015-16), just five big banks accounted for almost 60 per cent of such loans reported last year.

Largest lender

These are Bank of Baroda, Canara Bank, Corporation Bank, State Bank of India, and Syndicate Bank, who together have Rs.7,680 crore of advances at stake in 2015-16. State Bank of India, the country’s largest lender, identified loans worth Rs.1,841 crore in 2015-16 that were related to cheating cases, far higher than the Rs.248 crore in 2013-14.

Syndicate Bank’s fraud-related bad loans rose from Rs.123 crore in 2013-14 to Rs.1,385 crore in 2015-16. Just two cases of a banker-borrower nexus accounted for almost Rs.1,100 crore of those loans last year, according to separate data provided by the finance ministry about bank employees found to have colluded with such cheating borrowers. The total amount reportedly stuck in fraud-related bad loan cases jumped from Rs.5,591 crore in 2013-14 to Rs.12,935 in 2015-16, according to data submitted by the Ministry of Finance to the Lok Sabha on Friday. The number of cases of loans given on the basis of forged documents or cheating increased steadily from 1,520 in 2013-14 to 1,651 in the next year and 1,704 in 2015-16.

Forged documents

Several public sector banks saw an alarming growth in the number of loans discovered to have been given out on the basis of forged documents over the last three years. The higher numbers being reported could also reflect fresh scrutiny by bank managements in the face of the central bank’s March 2017 deadline to clean up their books.

Bank of India identified Rs.574 crore worth of loans as being granted on the basis of fake documents in 2015-16, up from just Rs 2.2 crore in 2013-14. Oriental Bank of Commerce saw its fraud-related loans rise from Rs.26 crore in 2013-14 to Rs.65 crore in the next year and Rs.506 crore in 2015-16.