With the Indian banking sector reeling under a series of frauds in which their own employees were found to be complicit, banks are now planning to increase insurance cover against “delinquent” employees to protect their bottom lines.
Currently, various banks have a basic banker’s indemnity policy, but it only covers employee fraud to the extent of 20 million rupees or US$309,200.
In the wake of huge scams at Punjab National Bank (114 billion rupees or US$1.76 billion) and Oriental Bank of Commerce (3.9 billion rupees or $60 million), banks are contemplating higher risk cover – among other moves – to insulate their balance sheets, the Press Trust of India has reported.
Earlier, banks were not keen to take higher cover as they apparently had faith in their own internal audit systems and risk management. But the recent discovery of serious frauds has compelled them to consider greater protection.
Banks are also tightening their internal risk mechanisms and vigilance against such frauds and wilful default cases.