Bank fraud cases skyrocket: RBI flags Rs 21,367 cr in losses in 6 months

Fraudsters often use social engineering tactics to trick individuals, and the use of mule accounts-bank accounts that are used to facilitate fraudulent transactions-has also surged.

A recent report by the Reserve Bank of India (RBI) has highlighted a concerning rise in bank fraud cases during the first half of the current fiscal year. From April to September, there were 18,461 reported frauds, amounting to a  Rs 21,367 crore. This marks a significant increase from the previous year, which saw 14,480 cases involving only Rs 2,623 crore.

 

To put this into perspective, the number of fraud cases has surged by nearly 28% compared to last year, while the total amount involved has skyrocketed more than eight-fold. 

 

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.

 

Types of Fraud on the Rise

The report also details the types of fraud that are most prevalent. In 2023-24, internet and card frauds constituted 44.7% of the total fraud amount and a remarkable 85.3% of the number of cases. This indicates that digital platforms are becoming increasingly vulnerable to fraudulent activities.

 

Private sector banks accounted for 67.1% of all reported fraud cases, but public sector banks faced the highest financial impact from these frauds, particularly in the realm of card and internet fraud.

 

Regulatory Actions and Penalties

In response to the rise in fraud, regulatory penalties have also increased. The total penalties imposed on banks more than doubled in 2023-24, reaching Rs 86.1 crore. Public and private sector banks were the main contributors to this increase, while co-operative banks saw a decline in penalty amounts.

 

The RBI is also taking steps to combat fraud in the digital lending sector. Many fraudulent schemes have emerged, falsely claiming to be associated with regulated entities. To address this, the RBI is developing a public repository of digital lending apps, which will help customers verify the legitimacy of these services.

 

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.