PNB Fraud: Banks for raising insurance cover against fraud by staff

PNB had only bought a basic banker`s indemnity policy, which covers employee fraud, to the extent of Rs 2 crore.

New Delhi: In the wake of an alleged Rs 11,300 crore fraud on state-run Punjab National Bank (PNB), lenders are now planning to increase insurance cover against delinquencies by their employees to protect their bottomlines.

Punjab National Bank had only bought a basic banker's indemnity policy, which covers employee fraud, to the extent of Rs 2 crore which would not cover even 0.2 per cent of Rs 11,300 crore fraud done allegedly by Nirav Modi, Mehul Choksi and his associates in connivance with officials of a Mumbai branch, news agency PTI has said.

Soon after this, a case of alleged swindling of Rs 390 crore from Oriental Bank of Commerce (OBC) was registered against a Delhi-based diamond jewellery exporter. In between there was a fraud case of Rs 3,695 crore by Rotomac Pen company owner Vikram Kothari in which the CBI filed cases and effected several arrests.

For example, SBI alone in 2016-17 reported frauds of Rs 2,424.74 crore (837 cases). Out of this, an amount of Rs 2,360.37 crore (278 cases) represents advances declared as frauds.

Meanwhile, the Confederation of Indian Industry (CII) in a report has said that the government should strategically divest its stake in PSBs to 33 percent in a phased manner and also adopt a twin strategy for tackling financial frauds, including better monitoring and supervision of banks and adoption of best corporate governance standards.

Noting that technology could be a major enabler for monitoring transactions that are subject to financial fraud and risks, the CII said: "Some banks are already deploying artificial intelligence, big data and blockchain technologies to better regulate their operations."

With Agency Inputs