A recent report from the Reserve Bank of India (RBI) has revealed an alarming increase in bank fraud incidents during the first half of the current fiscal year.
Between April and September, there were 18,461 reported fraud cases, totalling Rs 21,367 crore. This reflects a substantial rise from the previous year, which recorded 14,480 cases costing Rs 2,623 crore.
To put it in context, the number of cases has grown by almost 28% from last year, while the total monetary loss has surged more than eight times. The RBI’s Report on Trend and Progress of Banking in India 2023-24 details the performance of the banking sector, including commercial banks, cooperative banks, and non-banking financial institutions, for the current and upcoming fiscal years. The report indicates that the fraud counts for April-September reached 18,461 involving Rs 21,367 crore, compared to 14,480 cases amounting to Rs 2,623 crore in the same period last year, based on reported fraud data.
The report underscores that fraud poses various challenges to the financial system, including reputational, operational, and business risks, along with a potential erosion of customer trust, impacting financial stability.
Additionally, it identifies the most common types of fraud. In 2023-24, internet and card fraud accounted for 44.7% of the total amount lost and an impressive 85.3% of the cases. This trend shows that digital platforms are increasingly susceptible to fraudulent activities.
Private sector banks were responsible for 67.1% of all reported fraud cases, but public sector banks suffered the most significant financial losses, particularly from card and internet fraud.
In light of the surge in fraud, regulatory penalties have increased as well, more than doubling in 2023-24 to reach Rs 86.1 crore. Both public and private sector banks were the primary drivers of this rise, while cooperative banks experienced a decrease in penalties.
The RBI is also addressing fraud in the digital lending space, where various fraudulent schemes have emerged, posing as legitimate entities. To combat this, the RBI is creating a public repository of digital lending apps to help customers verify the authenticity of these services.
While many digital fraud cases stem from social engineering tactics targeting customers, there has also been a notable rise in the use of mule bank accounts to carry out these fraudulent activities, according to the RBI.
“This situation exposes banks to significant financial, operational, and reputational risks. Therefore, banks must strengthen their customer onboarding and transaction monitoring systems to detect illegitimate activities,” stated the RBI.
This also necessitates effective collaboration with law enforcement agencies (LEAs) to identify and address systemic issues promptly.
Furthermore, the Reserve Bank is working alongside banks and LEAs to enhance transaction monitoring systems and share best practices aimed at controlling mule accounts and preventing digital fraud.
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