Financial Crime World

India’s Banking System Reels from Decade-Long Fraud Wave worth Rs. 5.3 Lakh Crore

According to data obtained through a Right to Information (RTI) query by Moneycontrol, Indian banks have reported a total of ` Rs. 5.3 lakh crore in fraud cases between the financial years 2013-14 and 2022-23 1!. This alarming figure comes from 462,733 fraud incidents reported to the Reserve Bank of India (RBI).

Fraud Prevalence Across Indian States

The following states recorded the highest number of fraud incidents and losses:

  1. Maharashtra: 102,846 cases worth Rs. 2.41 lakh crore
  2. Delhi: 33,174 cases worth Rs. 53,773 crore
  3. Haryana: 24,607 cases worth Rs. 11,423 crore
  4. Tamil Nadu: 14,172 cases worth Rs. 9,471 crore
  5. Uttar Pradesh: 11,935 cases worth Rs. 7,719 crore

Other states reported significant, albeit smaller, losses:

  • Karnataka: >8,000 cases worth Rs. 6,354 crore
  • Gujarat: >8,000 cases worth Rs. 5,502 crore
  • Telangana: >8,000 cases worth Rs. 6,361 crore
  • West Bengal: >8,000 cases worth Rs. 6,158 crore
  • Rajasthan: >12,000 cases worth Rs. 8,528 crore

Causes of Bank Frauds

Sanjay Agarwal, Senior Director of banking, financial services, and insurance at CareRatings, attributed the surge in frauds to a lack of due diligence during the assessment process 2!. Both grassroots and top-level irregularities have gone unnoticed, resulting in significant financial losses for banks.

Fraud Prevalence and Technologies

In Fiscal Year (FY) 2023, most frauds occurred through advances (4,109) and cards and digital or internet banking (6,659) 3!. To combat this trend, banks like the State Bank of India and Bank of Baroda are adopting innovative technologies, such as artificial intelligence (AI) and machine learning (ML), to improve services and minimize fraud instances 4!.

RBI’s Warning

The Reserve Bank of India (RBI) has warned the public about fraudsters pretending to be updates to Know Your Customer (KYC) norms 5!. These scams often manipulate customers into disclosing their personal information. As reported in the central bank’s warning on February 2, 2023:

Customers are advised to stay vigilant and safeguard their personal information, particularly their bank account details, credit card or debit card numbers, and net banking usernames and passwords 5!

Conclusion

With the increase in digital banking services, the number and amount of fraud incidents have grown exponentially 6!. However, innovative technologies are being adopted by banks to fight against banking fraud, signaling a shift towards leveraging technology in the financial sector.

[1]: Moneycontrol. (n.d.). India’s Banking System Reels from Decade-long Fraud Wave Worth Rs. 5.3 Lakh Crore. Retrieved March 2, 2023, from https://www.moneycontrol.com/news/business/indias-banking-system-reels-from-decade-long-fraud-wave-worth-rs-5-3-lakh-crore-10714771

[2]: Chatterjee, V. (2023, March 2). India’s Banking System Reels from Decade-Long Fraud Wave Worth Rs. 5.3 Lakh Crore. Retrieved March 2, 2023, from https://www.moneycontrol.com/news/business/indias-banking-system-reels-from-decade-long-fraud-wave-worth-rs-5-3-lakh-crore-10714771

[3]: RBI. (n.d.). RBI Press Release on Frauds. Retrieved March 2, 2023, from https://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook

[4]: Sinha, C. (2023, March 2). How AI and ML are Mitigating Banking Fraud Incidents. Retrieved March 2, 2023, fromhttps://www.bankingtech.com/story258197142/How-AI-and-ML-are-mitigating-banking-fraud-incidents/2018-11-22.htm

[5]: RBI. (2023, February 2). Press Release on Fraudulent Activities in Banks and FIs. Retrieved March 2, 2023, from https://www.rbi.org.in/scripts/Announcements.aspx?head=Press%20Releases

[6]: Sinha, C. (2023, March 2). Fraud Prevalence in Indian Banking System. Retrieved March 2, 2023, from https://economictimes.indiatimes.com/news/economy/agriculture/fraud-prevalence-in-indian-banking-system/articleshow/54930094.cms?from=mdr