Thirty-three-year old Susmita took a housing loan of Rs 30 lakh from Bank A and bought a house. Then she went to another bank, Bank B, for getting a loan against the same property and luckily got it sanctioned. The story does not end here. She further went to another bank, Bank C, with a loan request for Rs 1 crore against the same property, which was initially mortgaged for Rs 30 lakh! Unfortunately for her, this time, Bank C checked with Cibil's central repository on fraud and mortgage and found out that the property was already mortgaged twice!

Frauds pertaining to fake title deeds are on the rise, with fraudsters using new methods to dupe banks, according to senior bank officials.

Misappropriation and criminal breach of trust, fraudulent encashment through forged instruments, negligence and cash shortages, escalation of overall cost of the property to obtain higher loan amount, over valuation of mortgaged properties at the time of sanction, grant of loans against forged FDRs, over-invoicing of export bills resulting in concessional bank finance and frauds stemming from housekeeping deficiencies are some of the common forms of frauds, senior bankers said.

Instances of frauds have gone up significantly with banks going all out on the technology front by enabling Internet and mobile banking services and setting up ATMs to facilitate easier access to their customers. Though bankers are not willing to disclose the number of such frauds happening on a day-to-day basis, they feel that frauds — whether externally committed by the customers or internally by the employees —are on the rise.

“The maximum number of frauds is pertaining to fake title deeds. It is a major area of concern for all banks. The other big issue is that of impersonation of identity. There are some minor frauds also occurring on the Internet due to sharing of password,” said Mr J.P. Dua, Chairman and Managing Director, Allahabad Bank.

With a view to put a check on the rise in banking frauds, the Reserve Bank of India recently asked public sector lenders to report cases of cheating involving Rs 1 crore and above to the Central Bureau of Investigation , and of the lesser amount to the police.

RBI measures

The central bank had further said that private and foreign banks should report cases of fraud involving an amount of Rs 1 lakh and above to the police. “Fraud by employees exceeding Rs 10,000 should also be reported to the police so that the person guilty of the offence does not go unpunished,” the RBI said.

Internal frauds (by employees)

While most of these frauds are committed by agents external to the banking industry, one cannot completely rule out the possibility of frauds by the employees or other senior directors of the bank. The Rs 300-crore Citibank fraud has woken up the RBI and banks to the reality of insiders' role in banking frauds.

ATM frauds

With a view to curbing frauds committed in ATMs, banks are installing ATMs with anti-fraud mechanism. Mr Ashok Shankar- Solutions Deployment Manager, NCR India, said, “Though the instances of frauds are not alarmingly high in the country at present, however, fraud is migratory in nature and so the possibility of frauds in the future cannot be ruled out.”

Pin compromise and card skimming are some of the common types of frauds relating to ATMs at present, he said. ATM security should be holistic in nature. NCR, Mr Shankar said, has introduced a Fraudulent Device Inhibitor to put a check on the rise in the number of frauds. The device would prevent card trapping and skimming (skimming is the theft of credit card information by either manually copying down numbers or using a magnetic stripe reader on a pocket-sized electronic device).

The company has another anti-fraud measure called ‘jitter' which employs a rapid stop-start motion when the user's card is inserted or taken out of an ATM. This prevents a fraudulent skimming device from reading the information on the card's magnetic stripe.

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