Indian banks report decade-long fraud totaling Rs. 5.3 lakh crore
Over the past decade, Indian banks have disclosed frauds totaling an astonishing Rs. 5.3 lakh crore, as per data from the Reserve Bank of India (RBI). This information was revealed in response to a right to information (RTI) petition filed by Moneycontrol. A total of 462,733 frauds were reported by both private and public sector banks, between the financial years 2013-14 and 2022-23.
Maharashtra leads in bank fraud
The RTI response also showed that Maharashtra topped the list of states reporting bank frauds, with Delhi, Haryana, Tamil Nadu, and Uttar Pradesh trailing behind. Other states such as Karnataka, Gujarat, Telangana, West Bengal, and Rajasthan reported between 8,000 to 12,000 bank frauds over the last decade. This data offers a detailed state-wise analysis of bank fraud prevalence across India.
Rising frauds attributed to lack of due diligence
Sanjay Agarwal, Senior Director of banking, financial services, and insurance at CareRatings, pointed out that the surge in bank frauds is due to a lack of due diligence in the assessment process. He noted that banks often overlook irregularities at both grassroots and top levels. This negligence has resulted in an escalation in both the number and amount of frauds over time.
Advances, cards and internet banking identified as fraud-prone areas
A review of RBI's recent annual report revealed that most frauds were related to advances, and through cards and digital or internet banking. For instance, in FY23 out of 13,530 cases reported, 6,659 occurred through cards and internet banking, while 4,109 were against advances. This data underscores the areas of banking most vulnerable to fraudulent activity.
RBI issues public warning against KYC update frauds
The RBI has alerted the public about frauds masquerading as updates to know your customer (KYC) norms. According to the central bank's warning issued on February 2, customers often receive unsolicited communications through which they are manipulated into revealing personal information. This alert emphasizes the importance of safeguarding personal data from potential fraudsters.
Surge in digital banking leads to increase in frauds
Industry experts have observed a rise in bank fraud due to the growing use of digital banking and payment services. Chandan Sinha, former executive director at RBI, stated that the significant increase in digital banking services usage has led to a surge in complaints and fraud. This trend highlights the risks associated with the increasing dependence on digital platforms for banking transactions.
Banks adopt AI and ML to counter fraud
In an effort to combat rising frauds, banks are turning to new technologies such as artificial intelligence (AI) and machine learning (ML) to improve services and minimize fraud instances. For instance, the State Bank of India has established institutional centers for AI product development, while Bank of Baroda has integrated tech at its branches to provide account details and offer other services. This move signifies a shift toward utilizing technology in the battle against banking fraud.
