Banks see steep rise in fraud cases

Mumbai: Both private sector and the state-owned banks as well lenders have reported huge number of fraud cases during the first quarter of the current fiscal, according to RBI data.

One of the leading private-sector lenders, Kotak Mahindra Bank recorded as many as 5,278 cases of fraud in the first quarter (April to June) of the current financial year (2022-23), according to the latest data from Reserve Bank of India (RBI). Taking the year gone by as a whole, the bank had reported 33,940 such cases.

The total number of frauds reported by Kotak Mahindra Bank (Kotak), in line with regulatory requirements, also includes instances of skimming, phishing, vishing, ecommerce frauds, across debit cards, credit cards, UPI, mobile banking, internet banking, payment gateways, etc., regardless of whether customers and / or the bank faced losses, or whether the fraud amounts were recovered eventually.

"We have observed that there is significant variance in what is chosen to be reported to the regulator by other banks. We have appealed to the regulator vide our letters dated March 17, 2022, and August 30 to enforce standardisation in reporting requirements," a bank statement said.

For the period reported, of the 5,278 instances for Kotak, 97 per cent are digital and card related frauds that occurred due to customers unwittingly compromising their credentials by clicking on unknown links or giving access to their devices or sharing their credentials with unscrupulous individuals willingly. Other banks do not appear to be exhaustively or uniformly reporting these types of frauds. Such frauds are not a reflection of any vulnerabilities in the bank's secure infrastructure and systems, the bank added.

The bank has seen a steady downward trend year-on-year (27 per cent) in such digital fraud transactions reported by customers while customer acquisition and digital transactions are increasing exponentially.

In stark contrast, India's largest lender State Bank of India (SBI) reported only nine fraud cases during the same period. Other leading private sector banks such as ICICI Bank, HDFC Bank, Indusind Bank and Axis Bank have also reported more cases of frauds reported up to the June quarter of the current fiscal.

ICICI Bank reported 436 cases of fraud during the period, followed by HDFC Bank (303), Indusind Bank (200), and Axis Bank (195). RBL Bank reported 150 cases of fraud during the first quarter of FY22-23, according to RBI. Compared to this, the number of fraud cases reported by top public sector banks of the country such as SBI, Punjab National Bank (PNB), Indian Bank, Indian Overseas Bank (IOB), Central Bank of India (CBI), Canara Bank, Bank of India (BoI), Bank of Maharashtra and Bank of Baroda (BoB) during the same period last year, mostly stood in single digit, with Canara Bank not reporting even a single case.

Meanwhile, RBI is working on setting up a fraud registry to check online frauds.

Talking to Bizz Buzz on this, Ranjan R Reddy, Founder and CEO of Bureau Inc, says: "This is a necessary initiative by RBI to improve trust in digital economy, in line with its payment's vision for 2025. While the Central Fraud Registry, and Central Payment Fraud registry exists already, this new source of verified identities will facilitate a comprehensive outlook on multiple fraud use-cases." As digital identifiers can be spoofed, and require behavioral data as well for precision. The challenge here would be to ensure accuracy with real-time exchange with multiple stakeholders. Overall, this is a significant step in securing Indian digital infrastructure from cyber frauds and enabling trust, he added.

This is a necessary initiative by RBI to improve trust in digital economy, in line with its payment's vision for 2025. While the Central Fraud Registry and Central Payment Fraud registry exists already, this new source of verified identities will facilitate a comprehensive outlook on multiple fraud use-cases

- Ranjan R Reddy, founder and CEO of Bureau Inc