The Reserve Bank of India (RBI) has reported a quantum leap in bank frauds in the 2017-18 financial year.

They reached the equivalent of US$6.2 billion compared with US$4.3 billion in the previous year according to the central bank's latest annual report.

The bank noted a huge increase in letter of credit (L/C) and other frauds using trade finance instruments.

Off-balance sheet abuse

Public sector banks (PSBs) accounted for 87 per cent of frauds involving bank loans according to the RBI.

It said the share of PSBs in frauds relating to off-balance sheet items such as L/Cs letters of undertaking, and letters of acceptance was even higher at 96 per cent.

PNB fraud

According to the RBI, the number of fraud cases reported by banks, which for ten years has hovered at around 4,500, increased to 5,835 in the 2017-18 financial year.

The central bank observed that the quantum leap in the value of frauds was largely due to the fraud allegedly committed by jewellers Nirav Modi, Mehul Choksi and others that caused US$2 billion of losses at Punjab National Bank.

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