Industrial Loans Fraud Detection Framework for Public Sector Banks

Abstract

Industrial loan Frauds incidents are on the rise with cases mostly spanning over Public Sector Banks (PSBs). Generally PSBs consider loan fraud risk as inherent risk but in recent times the amount involved has increased substantially and had a serious impact on bank’s profitability. Public Sector Banks in India are failing to manage loan frauds effectively. The rising incidents of loan frauds is a clear indicator of growing problem in Public Sector Banks and has been a matter of discussions at government and regulator’s level. But questions related to early detection and corrective measures remain unanswered that raise concerns of stake holders regarding effectiveness of Fraud detection approaches. This paper is an attempt to explore and study various approaches of fraud detection. This paper proposes a hybrid conceptual framework based on governance, compliance and fraud risk management to facilitate early detection of loan fraud. Finally the guide lines have been presented for successful implementation.