While the number of fraud cases in the banking sector more than doubled during the first half of the current financial year, the amount involved falls substantially year-on-year.

The number of fraud cases reported by banks for the six-month period ended 30 September 2023 increased to 14,483 cases from 5,396 a year ago. 

The value of these frauds between April and September this year stood at Rs 2,642 crore compared to Rs 17,685 crore in the same period a year ago, according to a RBI report.

The cases referred to as frauds involve Rs 1 lakh and more, the RBI said.

In the first half of FY24, most complaints were related to card or internet frauds, followed by advances-related cases.

The report on Trend and Progress of Banking in India 2022-23, underlined the need to protect the banking system and the payments system from the risks of fraud and data breaches emanating from cyber threats.

Private sector banks accounted for 66.2% of the total number of fraud cases reported during the period between April and September this year. In terms of the value involved, public sector banks had a higher share.

A majority of the frauds in public sector banks were related to advances. In case of private banks, however, the majority came from card/internet and cash-related cases, the RBI said in the report.

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

During 2022-23, 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, it added.

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, it said.

With the adoption of new technology, it said, the risks of cyberattacks, data breaches and operational failures have also increased.

Going forward, it said, banks need to better recognise and address these technology and cyber security risks to minimise potential vulnerabilities.

The evolving nature of risks faced by the banking system necessitates building resilience through good governance and robust risk management practices, it said.

The report said, Scheduled Commercial Banks (SCBs) in India, too, are leveraging AI for data analytics, fraud detection and other predictive analyses.

Banks have also deployed chatbots or virtual assistants to improve customer experience, it said.

The rise of artificial intelligence (AI) embodies the potential to revolutionise various aspects of banking, non-banking and financial markets, it said, adding, some AI technologies have been around for more than five decades.