The dynamics and diagnostics of cracked rotor have been gaining importance in recent years. In the present study a model-based method is proposed for the on-line identification of cracks in a rotor. The fault-induced change of the rotor system is taken into account by equivalent loads in the mathematical model. The equivalent loads are virtual forces and moments acting on the linear undamaged system to generate a dynamic behaviour identical to the measured one of the damaged system. The rotor has been modelled using finite element method, while the crack is considered through local flexibility change. The crack has been identified for its depth and location on the shaft. The nature and symptoms of the fault, that is crack, are ascertained using the fast fourier transform.