Banking fraud cases in India rose 27% to 18,461 in the first half of the current fiscal while the amount involved jumped more than eight-fold to Rs 21,367 crore, according to RBI data released today.

The number of bank frauds in the year-ago period stood at 14,480 cases while the total amount involved was at Rs 2,623 crore during this period.

The Reserve Bank of India's report on Trend and Progress of Banking in India 2023-24, presenting the performance of the banking sector, stated that these frauds present multiple challenges to the reputational risk, operational risk, business risk and erosion of customer confidence wit financial stability implications.

For the financial year 2023-24, the amount involved in frauds was the lowest in a decade, while the average value was the lowest in 16 years. 

The share of internet and card frauds in the total was 44.7% in terms of amount and 85.3% in terms of number of cases. 

In 2023-24, the number of fraud cases reported by private sector banks (PVBs) accounted for 67.1% of the total. In terms of amount involved, however, public sector banks (PSBs) had the highest share of card and internet frauds for all bank groups in 2023-24.

Instances of penalty imposed on regulated entities (REs) increased during 2023- 24 across all bank groups, except foreign banks and small finance banks.

The total penalty amount more than doubled in 2023-24 to Rs 86.1 crore, led by public and private sector banks. 

The amount of penalty imposed on co-operative banks declined during the year, while there was an increase in instances of penalty imposition.

The report also said that several reports indicate the continued presence of unscrupulous players in the digital lending space, who falsely claim association with REs.

To aid the customers in verifying the claims of a Digital Lending App's (DLA) association with an RE, the Reserve Bank is in the process of creating a public repository of DLAs deployed by REs, news agency PTI reported.

The repository will contain data submitted by REs, without any intervention by the Reserve Bank and REs will be required to update the same whenever there is an addition of a new DLA or deletion of an existing DLA.

While many cases of digital fraud result from social engineering attacks on customers, there is also a rapid increase in the use of mule bank accounts to perpetrate such frauds, RBI said.

"This exposes banks not only to serious financial and operational risks, but also to reputational risks. Banks, therefore, need to strengthen their customer onboarding and transaction monitoring systems to monitor unscrupulous activities," the RBI said.

This also requires effective co-ordination with the law enforcement agencies (LEAs) so that the concerns occurring at a systemic level are detected and curbed in time.

The Reserve Bank further said it is working with banks and LEAs to strengthen transaction monitoring systems and ensure sharing of best practices to control mule accounts and prevent digital frauds.