Banking frauds rise in H1FY25, amount involved jumps 8-time: RBI report

The number of bank frauds witnessed a significant on-year increase in the first half of the current fiscal to 18,461 cases and the amount involved jumped more than eight-fold to Rs 21,367 crore, according to RBI data released on Thursday.

The Reserve Bank of India 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, co-operative banks and non-banking financial institutions, during 2023-24 and 2024-25 so far.

The report said the number of frauds during April-September stood at 18,461 involving Rs 21,367 crore compared to 14,480 cases involving Rs 2,623 crore in the comparative period of the last financial year, based on the date of fraud reporting.

It further said frauds present multiple challenges for the financial system in the form of reputational risk, operational risk, business risk and erosion of customer confidence with financial stability implications.

Regarding 2023-24 fiscal as a whole, the RBI said that based on 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 the total stood at 44.7 per cent in terms of amount and 85.3 per cent in terms of 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 amount involved, however, public sector banks (PSBs) had the highest share of card and internet frauds was highest for all bank groups in 2023-24.

Instances of penalty 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 amount of penalty imposed on co-operative banks declined during the year, while there was an increase in instances of penalty imposition.

The 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 (DLA) 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 RBI said.

This also requires effective co-ordination with the law enforcement agencies (LEAs) 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.