Context (RBI): The Reserve Bank of India in its Report on Trend and Progress of Banking in India 2024–25 highlights a paradox: fraud cases declined sharply, but the total amount involved surged, pointing to concentration of risk in high-value advances.
Key Findings from the RBI Report
- Overall Trend:
Fraud cases declined to 23,879 in FY25 from 36,052 in FY24, but the value jumped to ₹34,771 crore from ₹11,261 crore. - Court-Linked Reclassification:
A major spike arose from 122 cases worth ₹18,336 crore, re-reported after compliance with the Supreme Court’s principles of natural justice requiring borrower hearings. - H1 FY26 Snapshot (Apr–Sep):
Cases fell to 5,092 (from 18,386), while the amount involved rose to ₹21,515 crore. - Digital Frauds:
Card and internet frauds constituted 66.8% of cases by number in FY25, reflecting high-frequency, low-value incidents. - Loan (Advances) Frauds:
Advances-related frauds accounted for about 33.1% of the total amount by value, despite fewer cases. - Bank-Group Pattern:
- Private banks: 59.3% of cases
- Public Sector Banks (PSBs): 70.7% of the total amount involved
Why the Number of Frauds Fell
- Digital Transaction Controls:
AI-based monitoring, velocity checks, and risk-based authentication across core banking platforms have curtailed small-value fraud attempts. - Stronger KYC Regime:
Mandatory re-KYC, video-based customer identification, and centralised KYC records reduced impersonation and mule accounts. - Early Warning Systems (EWS):
Automated alerts for unusual account behaviour enabled faster freezing of suspicious transactions, aided by account-level dashboards. - Consumer Awareness:
SMS alerts, helplines, and nationwide cyber awareness campaigns improved customer response time to fraud attempts.
Why Value of Frauds Rose Sharply
- Legacy Loan Frauds:
Large corporate and consortium loan frauds often surface after forensic audits, inflating total values in a single year. - Reclassification Impact:
Earlier under-reported or disputed cases were re-examined and reported afresh, adding high-ticket amounts. - Concentration in Advances:
Credit-related frauds involve large exposure sizes, unlike retail digital frauds that are frequent but low in value.
Way Forward
- Risk-Based Supervision:
Intensify scrutiny of large-value advances using dynamic risk-scoring and borrower heat maps. - Unified Fraud Intelligence:
Integrate fraud registries across banks and non-banks for real-time red-flag sharing through interoperable platforms. - Digital Payment Safeguards:
Introduce cooling-off periods and beneficiary verification for first-time or high-risk transactions. - Board-Level Accountability:
Mandate periodic fraud-risk reviews by bank boards with fixed response timelines and governance dashboards.