Bank fraud cases jump in first half of FY24: RBI

Fraud cases in the banking sector rose during the first half of the ongoing financial year even as the amount involved in frauds dropped significantly, according to the Reserve Bank of India (RBI).

The number of frauds in banks jumped to 14,483 during the April-September period of the current fiscal from 5,396 in the corresponding period last year.

However, the amount involved in the frauds was only 14.9% of the previous year's amount. The total amount involved dropped significantly from ₹17,685 crore during April-September last year to ₹2,642 crore in the same period this fiscal.

During FY23, the total amount of frauds reported by banks declined to a six-year low while the average amount involved in frauds was the lowest in a decade, says the banking regulator. Based on the date of occurrence of frauds, the average amount involved declined during 2022-23, with the number of cases concentrated in card or internet-related frauds.

The number of fraud cases reported by private banks accounted for 66.2% of the total. In terms of the amount involved, PSBs had a higher share.

While the majority of the frauds in public sector banks (PSBs) were related to advances, private lenders accounted for a majority of card or internet and cash-related cases.

"New technologies enhance the efficiency and effectiveness of banking operations. With this, however, the risks of fraud and data breaches have also increased," the RBI says.

"Concerted efforts by all stakeholders including regulators, banks and customers are required to protect the system from these threats. On its part, the Reserve Bank has been striving to update the regulations to protect customers while ensuring that innovations are not stifled," the banking regulator says.

Frauds lead to reputational, operational and business risk for banks and undermine customers' trust in the banking system with financial stability implications, says the RBI.

Efforts by all stakeholders are required to protect the banking system and the payments system from the risks of fraud and data breaches emanating from cyber threats, the central bank says.

The Indian banking system and non-banking financial companies (NBFCs) remain sound and resilient, backed by high capital ratios, strengthening asset quality and robust earnings growth, the RBI says.

"Looking ahead, given the increasing interconnectedness between banks and NBFCs, the latter should focus on broadbasing their funding sources and reduce overdependence on bank funding. Banks and nonbanks both need to bring in greater empathy in their customer services," the regulator says.

Overall, banks and NBFCs need to further strengthen their balance sheets through robust governance and risk management practices to meet the growing aspirations of the Indian economy, it adds.

The consolidated balance sheet of scheduled commercial banks (SCBs) in 2022-23 expanded by 12.2%, driven by credit to retail and services sectors; deposit growth also picked up, although it trailed credit growth. Higher net interest income and lower provisioning boosted net interest margin (NIM) and profitability in 2022-23.