Banks Create Watchlist of 3,000 Fraudulent Entities to Curb Loan Scams

Banks have identified about 3,000 entities involved in fraudulent activities, and they plan to share and update this list in real-time to combat the rise in banking frauds. This list includes lawyers, builders, gold loan appraisers, and others who have been involved in securing loans through dishonest means, according to sources familiar with the situation.

The issue was recently discussed in a meeting with the Advisory Board for Banking and Financial Frauds (ABBFF). It was decided that banks must check this list before dealing with any entities and keep it updated. A senior bank executive mentioned that the list will likely grow as banks follow the latest fraud classification guidelines issued by the Reserve Bank of India (RBI) on July 15.

Another executive pointed out that some operational staff have not been checking this “caution list” as required, allowing fraudulent entities to re-enter the financial system. Banks will be sending out internal directives to ensure full compliance with these guidelines.

Currently, banks take individual action against fraudulent entities, but it has been noticed that these entities often manage to work with other financial institutions. The consolidated list will help all lenders verify and avoid doing business with those involved in banking fraud.

The Central Vigilance Commission (CVC) has instructed that all public sector banks, insurance companies, and financial institutions must refer any fraud cases involving ₹3 crore and above to the ABBFF for advice. The ABBFF also has the authority to analyze fraud patterns in the financial system and suggest policy changes to the RBI and CVC.

The list is expected to expand soon, potentially including more entities like business correspondents, chartered accountants, and valuers.