The number of bank frauds witnessed a significant year-on-year increase in the first half of the current fiscal year, rising to 18,461 cases, with the amount involved jumping more than eightfold to Rs 21,367 crore, according to Reserve Bank of India (RBI) data released on Thursday.
The RBI has released the Report on Trend and Progress of Banking in India 2023-24, which presents the performance of the banking sector, including commercial banks, cooperative banks, and non-banking financial institutions, during 2023-24 and 2024-25 so far.
The report indicated that the number of frauds between April and September stood at 18,461, involving Rs 21,367 crore, compared to 14,480 cases involving Rs 2,623 crore in the corresponding period of the previous financial year, based on the date of fraud reporting.
It further highlighted that frauds present multiple challenges for the financial system, including reputational risk, operational risk, business risk, and erosion of customer confidence, with implications for financial stability.
Regarding the 2023-24 fiscal year as a whole, the RBI noted that, based on the date of reporting by banks, the amount involved in frauds was the lowest in a decade, while the average value was the lowest in 16 years.
Based on the date of occurrence of frauds, in 2023-24, the share of internet and card frauds in total stood at 44.7 per cent in terms of amount and 85.3 per cent in terms of the number of cases.
In 2023-24, the number of fraud cases reported by private sector banks (PVBs) accounted for 67.1 per cent of the total. In terms of the amount involved, however, public sector banks (PSBs) had the highest share of card and internet frauds, which was the highest for all bank groups in 2023-24.
Instances of penalties imposed on regulated entities (REs) increased during 2023-24 across all bank groups, except foreign banks and small finance banks. The total penalty amount more than doubled in 2023-24 to Rs 86.1 crore, led by public and private sector banks. The penalty imposed on cooperative banks declined during the year, although there was an increase in the instances of penalty imposition.
The report also noted that several reports indicate the continued presence of unscrupulous players in the digital lending space, who falsely claim association with REs.
To assist customers in verifying the claims of a Digital Lending App's (DLA) association with an RE, the RBI is in the process of creating a public repository of DLAs deployed by REs. The repository will contain data submitted by REs, without any intervention by the RBI, and REs will be required to update it whenever a new DLA is added or an existing one is deleted.
While many cases of digital fraud result from social engineering attacks on customers, there has also been a rapid increase in the use of mule bank accounts to perpetrate such frauds, the RBI stated.
"This exposes banks not only to serious financial and operational risks but also to reputational risks. Therefore, banks need to strengthen their customer onboarding and transaction monitoring systems to monitor unscrupulous activities," the RBI concluded.
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