State-run banks saw a marked rise in incidents of fraud in the first three months of this fiscal, a list compiled by the government shows, adding to concerns over the management of these lenders.

The data shows that fraudsters cheated these banks of Rs 2,417 crore of public money between April and June. The amount is more than half of the loss of Rs 4,183 crore in entire 2013-14 through 1,174 cases of fraud.

The Central Bank of India alone reported 59 cases of fraud involving Rs 1,047 crore in the three months to June, according to the data made available by the finance ministry.

In the previous fiscal, too, the Central Bank of India had the dubious distinction of topping the list with 117 cases of fraud involving Rs 818 crore.

As per the Reserve Bank of India guidelines, all advances related to fraud cases of Rs 1 lakh and above are maintained under 'cheating and forgery' category. State Bank of India is the second on the list, having taken a hit of Rs 437 crore on account of 61 fraud cases in the three months to June. Syndicate Bank and UCO Bank are third and fourth on the list.

Bank employees are being probed in 170 cases of embezzlement worth Rs 491 crore during this period.

"Our loan sanctioning process is stringent. There may be some legacy cases but this fiscal no employee of SBI has been involved in any embezzlement of funds," said a senior SBI official, who did not wish to be named. But for the Central Bank of India, the situation is not so good. So far there have been 41 cases of embezzlement of funds and the bank has removed or dismissed 102 officials, the largest for any state-run bank. The closest is Syndicate bank with 55 employees removed or dismissed.

Earlier in the year, Syndicate Bank's chairman and managing director SK Jain was arrested by the Central Bureau of Investigation for allegedly accepting bribes of Rs 50 lakh to enhance the credit limit of some companies. Jain was later removed by the government.

Syndicate Bank has, however, reported only 14 cases of fraud till June 2014, amounting to Rs 253 crore. Experts believe that it will be prudent to invest more resources to proactively handle stressed accounts through independent borrower checks.

"Banks need to leverage technology and data analytics to catch early warning signals, develop internal skill sets on credit assessment and evaluation," said Arpinder Singh, partner and national leader, fraud investigation and dispute services at EY India.

The NDA government, which took charge in May, has voiced concerns over the functioning of the public sector banks. The finance ministry also cancelled the appointments of eight CMDs and 14 executive directors of state-run banks made by the previous UPA government.

The ministry had decided to cancel the appointments on the recommendation of a select committee set up to examine the selection process to the posts of CMDs and executive directors of public sector banks for 2014-15.

"Banks have been asked to do more strict due diligence before loan sanctioning and in cases where employees are found in cahoots with the perpetrators strict action is being taken," said a finance ministry official on the condition of anonymity. (Economic Times)