SBI will strengthen its early warning system to detect stress andfraud

The largest lender in the nation, the State Bank of India (SBI), is attempting to improve its
early warning system by utilising outside information such as rating changes, dramatic share
price movements, and even media reports to anticipate frauds, fund diversions, and loan
defaults.
The bank contends that although one of the major contributors to asset quality issues and
frauds is the misappropriation of funds through linked parties, trusts, and foreign subsidiaries,
lenders only receive concrete information following a forensic audit. It requests that a data
service provider find a mechanism to identify suspicious activity and probable defaults even
before thorough audits reveal a public tender document.
According to SBI, the data supplier is required to send notifications regarding violations of a
list of 199 early warning signals from outside sources. These include warnings when ratings
or outlooks change when stock prices reach a 52-week low in a given week when promoter
holdings drop below 26%, and when the number of employees decreases on a monthly basis,
according to data from the Employees’ Provident Fund Organization (EPFO), when income
tax, sales tax, and central excise duty officials raid businesses, and when government
agencies impose fines. SBI recorded 4,192 frauds totalling 7,101 crores in 2021–2022 and set
aside a matching amount as contingencies. It reported 5,724 scams totalling 10,086 crores in
2020–21, according to its FY22 annual report.

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