This paper deals with a fault detection investigation of SCBs, and it is focused on the faulty phase detection and the number of faulty capacitor units. Unlike previous methods, the proposed method provides a relay decision making criterion which determine the faulty capacitors, and the number of capacitor failures in case of multiple faulty phase conditions. The proposed algorithm is applied on different wye configurations of SCBs considering different protection designs (i.e., fuseless, internally and externally fused units). Since the detection of capacitor failures in SCBs are based on the fundamental phasor component, there may occur a significant delay in decision making in the case of an external short circuit fault in the power system. The aforementioned condition, which will be mathematically proven, happens due to a capacitor discharge after fault clearance. To deal with this condition, a method is proposed by applying an algorithm, in which the fundamental component of the voltage signal is extracted in one cycle. Performance evaluations associated with the proposed method are provided for different fault conditions, fault locations, and different levels of harmonics and, they are further discussed through the implementation of the proposed method in MATLAB environment.