Bank Frauds Surge Eight Times In First Half Of FY25, RBI Report Reveals
In comparison, the total amount of bank frauds reported in fiscal 2024 was the lowest in a decade.
According to data released by the Reserve Bank of India on Thursday, bank frauds saw a significant rise in the first half of the current fiscal year
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Bank frauds saw a significant rise in the first half of the current fiscal year, with 18,461 cases, amounting to Rs 21,367 crore, being reported, according to the Reserve Bank of India's report on trend and progress of banking in India 2023-24.
This marks an increase of eight times from the same period in the previous fiscal, when 14,480 fraud cases totalling Rs 2,623 crore were reported.
The report also highlighted that frauds pose several challenges to the financial system, including reputational risk, operational risk, business risk, and a loss of customer trust, all of which can have serious implications for financial stability.
For fiscal 2024, the RBI noted that based on the date of reporting by banks, the total amount involved in frauds was the lowest in a decade, while the average value was the lowest in 16 years.
When looking at the date of occurrence of frauds, the RBI found that internet and card frauds accounted for 44.7% of the total amount involved and 85.3% of the total number of fraud cases in fiscal 2024.
The number of fraud cases reported by private sector banks accounted for 67.1% of the total cases in fiscal 2024.
Instances of penalty imposed on regulated entities increased during the fiscal across all bank groups, except foreign banks and small finance banks.
The total penalty amounts more than doubled in fiscal 2024 to Rs 86.1 crore, led by public and private sector banks. The amount of penalty imposed on co-operative banks declined during the year, while there was an increase in instances of penalty imposition.
The RBI report also said that several reports indicate the continued presence of unscrupulous players in the digital lending space, who falsely claim association with REs.
To aid the customers in verifying the claims of a digital lending app's association with an RE, the Reserve Bank 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 Reserve Bank and REs will be required to update the same whenever there is an addition of a new DLA or deletion of an existing DLA.
While many cases of digital fraud result from social engineering attacks on customers, there is also a rapid increase in the use of mule bank accounts to perpetrate such frauds, RBI said.
"This exposes banks not only to serious financial and operational risks, but also to reputational risks. Banks, therefore, need to strengthen their customer onboarding and transaction monitoring systems to monitor unscrupulous activities," the central bank noted.
This also requires effective co-ordination with the law enforcement agencies so that the concerns occurring at a systemic level are detected and curbed in time.
The Reserve Bank further said it is working with banks and LEAs to strengthen transaction monitoring systems and ensure sharing of best practices to control mule accounts and prevent digital frauds.
(With PTI inputs)
