Indian banks have collectively reported frauds amounting to a staggering Rs 5.3 lakh crore over the last decade, as per data released by the Reserve Bank of India (RBI) in response to a Right to Information (RTI) request. The data, covering the period from 2013-14 to 2022-23, shows a total of 4,62,733 fraud cases reported by both private and public sector banks.
Among the states and Union territories, Maharashtra emerged with the highest number of reported frauds, followed by Delhi, Haryana, Tamil Nadu, and Uttar Pradesh. Karnataka, Gujarat, Telangana, West Bengal, and Rajasthan also featured prominently, each reporting between 8,000 to 12,000 cases of bank frauds during the past 10 financial years.
Commenting on this concerning trend, Sanjay Agarwal, senior director of banking, financial services, and insurance at CareRatings, acknowledged the rise in fraud cases but highlighted banks’ efforts towards credit risk assessment. ‘Frauds have been rising but banks are focusing on credit risk assessment,’ Agarwal stated.
An analysis of recent annual reports from the central bank revealed that a majority of the reported frauds were related to advances, cards, and digital or internet banking. For instance, in the fiscal year 2022-23 (FY23), banks reported the highest number of frauds through cards and internet banking. Out of 13,530 cases, 6,659 occurred through these channels, with frauds against advances also significant at 4,109. The previous fiscal year, FY22, saw 9,097 frauds, with 3,833 related to advances and 3,596 through cards and internet banking. In FY21, out of a total of 7,338 reported frauds, 3,476 were against advances and 2,545 through cards and internet.
Amidst these alarming statistics, the RBI issued a caution on February 2 against frauds disguised as updates to know your customer (KYC) norms. Customers have been advised to remain vigilant against unsolicited communications, such as phone calls, SMS, or emails, which are often used to manipulate individuals into revealing personal information.
Experts attribute the rise in bank frauds to the increasing usage of digital banking and payment services. Chandan Sinha, former executive director of the RBI, noted, ‘The use of digital banking services has jumped significantly. This has led to customers using banks’ (internet) applications (apps) for many banking services and due to which there has been a jump in complaint numbers and frauds.’
To combat these challenges, banks are investing in new technologies such as artificial intelligence and machine learning to enhance services and reduce instances of fraud. State Bank of India has established institutional centers to develop AI products, while Bank of Baroda has implemented tech solutions at its branches. Several banks have also introduced chatbots on their websites and apps to assist customers with basic communication and handling queries.
RBI Executive Director Ajay Kumar Choudhary highlighted the central bank’s initiatives to educate the public on online frauds. ‘The data privacy law will help further tackle online fake messages frauds,’ Choudhary mentioned during a discussion.
In response to the growing risks, Agarwal emphasized that banks and their boards are prioritizing and investing more in risk management and assessment. ‘We’ve seen banks and even the central bank highlighting and focusing more on risk assessment,’ he added.
This data sheds light on the substantial challenges faced by Indian banks in combating fraud, prompting increased emphasis on technological solutions and risk management strategies to safeguard customers’ interests and maintain the integrity of the financial system.
