New Delhi, September 18, 2017

As many as 22,949 cases of fraud in both public and private banks came to light in the last five fiscals involving over Rs 69,769 crore

The Big 4 auditors -- KPMG, EY, Deloitte and PricewaterhouseCoopers -- figure in the list of entities that have been empanelled by the Indian Banks' Association (IBA) to do forensic audit of frauds in banks.

The number of banking fraud cases involving Rs 1 lakh and above is on the rise, which has increased to 5,076 in the fiscal ending March 2017, from 4,235 in 2012-13.

As many as 22,949 cases of fraud in both public and private banks came to light in the last five fiscals involving over Rs 69,769 crore.

Besides the Big 4, others on the list include BMR Advisors, Chokshi and Chokshi LLP, and Grant Thornton, Mukund M Chitale and Co.

The IBA has empanelled 39 audit firms for conducting forensic audit of frauds exceeding Rs 50 crore in banks.

Similarly, 73 auditing firms have been indented for forensic audit in banks where the amount involved in frauds is less than Rs 50 crore.

"Prior to assignment and engagement, member banks need to invite price bids from the empanelled audit firms," the IBA said.

Earlier, the IBA had invited applications from chartered accountant firms for empanelment to take up assignments relating to forensic audit of frauds up to Rs 50 crore and frauds above Rs 50 crore in the banking industry with a view to recovering money and curbing such practices.

Concerned over high incidence of frauds in banks, the Reserve Bank had operationalised a Central Fraud Registry (CFR) as a searchable centralised database for use by banks in January 20 last year.

The reasons for fraud, according to the RBI, include gaps in credit underwriting standards, liberal cash flow projection at the proposal stage, lack of continuous monitoring of cash flow and cash profits (Ebitda), and lack of security perfection.

The other reasons are overvaluation, gold-plating of projects, diversion of funds, double financing and general credit governance issues in banks.

[The Business Standard]