Thu. Mar 28th, 2024
Economic Offence

The Karvy stock broking fraud in November shocked the entire nation for allegedly misusing securities of over 95,000 clients which it was holding to raise over Rs 600 crore in loans. The growing instances of such economic frauds are posing a serious threat for Indian economy. The economic offence wing has started searching other broking firms across the nation. Now, the recently-released data of the National Crime Records Bureau of 2017 represents a gloomy picture and worrying trend for the Indian economy.

The National Crime Records Bureau report of 2017, delayed in releasing, suggests that the rate of economic offences rose to 111.3 crimes (per million people) in 2017 from 110 in 2014. The data has been collected as the offences reported under Indian Penal code (IPC). Such economic offences include several different crimes ranging from ATM-related fraud to forgery to counterfeit notes.

Such rise in bank fraud, no doubt, could be made responsible for such a slow growth of the Indian economy. But more attention on detecting economic fraud in recent years is also a responsible factor for a higher degree of reported economic offences in India.  The Reserve Bank of India recently directed banks that all non-performing assets with a value of exceeding Rs. 50 crores should be examined for possible fraud.  A Central Fraud Registry has also been established to track these cases. The large-scale bank frauds often catch the headlines in media but they are only one side of economic offences. Overall economic offences ranging from ATM fraud to counterfeit and forgery are also equally responsible for the slow growth and are on the rise.

The economic offences disrupt the financial stability and the normal working of banking systems of the nation. The recent bank fraud at the Punjab & Maharashtra Co-operative Bank (PMC) claimed the lives of nine depositors. In its annual report, the Reserve Bank of India (RBI) has expressed serious concerns over such growing bank frauds over the past decade. The latest annual report of the RBI has estimated the amount involved in frauds of above Rs.1 lakh in Indian banks’ at Rs.71,543 crores in 2018-19, up by 74% from Rs. 41,168 crores in 2017-18.

The public sector banks (PSBs) accounted for 90% of the fraud value and 55% of the number of frauds as per the annual report. The data also suggests that PSB bank frauds have continued to worsen in the current financial year too. The finance minister in her response to a question in the Rajya Sabha pointed out that PSB bank frauds had reached Rs. 95,760 crores between April to September 2019 compared to Rs. 64,509 crores during 2018-19. The State Bank of India recorded the highest losses amounting to Rs. 25,417 crores followed by Punjab National Bank of Rs. 10,822 crores and Bank of Baroda of Rs. 8,273 crores in the list of PSBs.

Forgery, cheating and fraud accounted for 86% of all economic offences in India.  At the time of demonetization in 2016, the NDA-government emphasized the dangers of counterfeit notes in funding cross border terrorism and credited as an important reason for their decision of demonetization. But new NCRB data suggests that demonetization may have had little effect in curbing counterfeit notes. After passing a year of demonetization in 2017, the value of fake currency seized stood at Rs. 28 crores, based on around 1000 FIRs registered. And more than half of this fake currency of Rs. 15 crores was in fake versions of the new Rs. 2000 notes.

The economic offences reported in cities are usually higher than in the villages and towns. The capital city Delhi and the financial capital Mumbai top the list of reported economic offences in 2017.

Jaipur and Lucknow have also been tagged as the worst-performing cities. Analysis suggests that the city’s real estate business after the demonization could be linked with the economic offences in Pink City Jaipur.

One thought on “As India’s economy slows down, frauds are on the rise”
  1. The broking industry is facing challenges and Karvy episode is believed to be a case in point. However, the fact remains that the regulator needs to address the larger and more deeply entrenched regulatory issues.

Leave a Reply

Your email address will not be published. Required fields are marked *