MC Exclusive: Indian banks reported frauds worth Rs 5.3 lakh crore in last 10 years

Also read: Major banks warn customers against engaging with fake social media handles

Worrying rise

An analysis of some of the central bank’s recent annual reports showed that most frauds related to advances, and through cards and digital or internet banking.

For example, in FY23, banks reported maximum frauds through cards and internet banking. Cards include debit and credit cards. Out of the 13,530 cases reported in FY23, 6,659 happened through cards and internet banking. Frauds against advances were also high at 4,109. A year before, in FY22, out of total 9,097 frauds, frauds against advances were at 3,833 and through cards and internet were at 3,596. And in FY21, frauds against advances stood at 3,476 and through cards and the internet were at 2,545 out of a total 7,338.

Additionally, the RBI on February 2 cautioned the public against frauds under the garb of updating know your customer (KYC) norms in the wake of continuing reports of customers falling prey to such instances. The modus operandi in such cases usually involved customers receiving unsolicited communications, including phone calls, SMS or emails, through which they are manipulated into revealing personal information, the RBI said.

Experts said that in the last few years, due to a rise in the usage of digital banking and payments services, bank frauds have seen an uptick.

"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," said Chandan Sinha, former executive director, RBI.

Simultaneously, banks are working to improve their digital offerings by investing in new technology like artificial intelligence (AI), machine learning (ML), etc., to enhance services and reduce instances of fraud. For example, State Bank of India has set up institutional centres to develop AI products. Bank of Baroda has introduced tech at its branches to provide account details and offer other services. Many banks have introduced chatbots on their websites and apps that are used mainly for basic communication and handling customer queries. ICICI Bank’s chatbot, called iPal, guides visitors on the website to service options. HDFC Bank’s Eva chatbot assists website visitors with complaints and other services.

Also read: MC Explains: Understanding RBI's revised norms on lenders releasing original property documents to borrowers

RBI executive director Ajay Kumar Choudhary during a discussion at Moneycontrol's inaugural India Fintech Conclave (IFC) on March 7, 2023, said the central bank had taken multiple initiatives to educate people regarding online frauds. "The data privacy law will help further tackle online fake messages frauds," Choudhary said.

Agarwal also highlighted that banks and their boards are forusing and investing more on risk management and assessment. "We've seen banks and even the central bank highlighting and focusing more on risks assessment," he said.