The number of bank frauds saw a year-on-year rise in the first half of the current fiscal at 18,461 cases and the amount involved rose more than eight times to Rs 21,367 crore, according to RBI data released on Thursday.
The Reserve Bank of India has released the Trend and Progress of Banking in India 2023-24 Report which presents the performance of the banking sector, including commercial banks, cooperative banks and non-banking financial institutions, between 2023-24 and 2024. -25 so far.
The report said the number of frauds in April-September stood at 18,461 cases involving Rs 21,367 crore as against 14,480 cases involving Rs 2,623 crore in the comparable period of the previous financial year, based on the date of fraud reporting.
It further stated that fraud brings many challenges to the financial system in the form of reputational risk, operational risk, business risk and the deterioration of customer confidence which has an impact on financial stability.
For fiscal 2023-24 as a whole, the RBI said based on the banking reporting date, the amount involved in fraud was the lowest in a decade, while the average amount was the lowest in 16 years.
Based on the date the fraud occurred, in 2023-24, the share of total online and card fraud stood at 44.7 percent by value and 85.3 percent by number of cases.
In 2023-24, the number of fraud cases reported by private sector banks (PVBs) was 67.1 percent of the total. In terms of volume involved, however, public sector banks (PSBs) had the highest share of cards and cyber fraud was the highest among all banking groups in 2023-24.
Penalties imposed on regulated entities (REs) increased between 2023-24 for all banking groups, except foreign banks and small finance banks.
The total penalty amount doubled in 2023-24 to Rs 86.1 crore, led by private and public sector banks. The amount of fines imposed on cooperative banks decreased during the year, while there was an increase in the number of fines.
The report also said that several reports indicate the continued presence of unscrupulous players in the digital lending space, who lie about meeting with REs.
To assist customers in verifying Digital Lending App’s (DLA) association claims with RE, the Reserve Bank is in the process of creating a public repository of DLAs used by REs.
The database will contain the information submitted by the REs, without the intervention of the Reserve Bank and the REs will be required to update the same whenever there is addition of new DLA or removal of existing DLA.
While most 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 commit such fraud, RBI said.
“This exposes banks not only to major financial and operational risks, but also to reputational risks. Therefore, banks need to strengthen their customer monitoring systems and monitor transactions to monitor inappropriate activities,” RBI said.
This also requires active engagement with law enforcement agencies (LEAs) so that system-level concerns are detected and addressed in a timely manner.
The Reserve Bank further said that it is working with banks and the LEA to strengthen transaction monitoring systems and ensure sharing of best practices for managing mule accounts and preventing digital fraud.
