Cyber frauds are bedevilling India’s banking system like never before. Despite the banks’ claims of setting up robust systems and anti-fraud teams to constantly monitor transactions, the number of frauds is skyrocketing. A recent Reserve Bank report said that reported cases of card- and internet-based frauds have multiplied several times to 12,069 in the first half of the current financial year; they occupy the lion’s share of the 14,483 fraud cases reported in all. Card and cyber frauds during the period involved transactions of Rs 630 crore, against Rs 87 crore in first half of the previous year.
Ever since the inception of National Payments Corporation in 2008 by the RBI to streamline retail payment systems in the country, India has reported a remarkable transformation from a predominantly cash-based economy to a digital payments leader. Most of the growth came in the last few years, thanks to the rapidly expanding smart-phone penetration, less expensive internet access, user-friendly digital apps and low-cost payment gateways.
The United Payments Interface (UPI) that enables instant transfers between bank accounts using a mobile phone has been the prime contributor to India’s vibrant digital payments ecosystem. The government says India now accounts for nearly 40 percent of global real-time digital payments, with the country’s digital transactions value being more than the combined value of the US, UK, Germany and France.
At the same time, there needs to be a constant vigil on fraudsters and imposters. The RBI recently found a series of compliance violations by banks that included the failure in reporting and misclassifying fraud cases. The central bank imposed penalties on several prominent banks including ICICI, Kotak and SBI. ICICI Bank, for example, faced one of the highest penalties in recent times, amounting to Rs 12.2 crore.
There are no shortcuts in the fight against fraudsters, who continue to device innovative ploys to trick bank customers. Banks need to be on their toes. The central bank has continued to highlight the critical need to safeguard the banking and payment systems from the growing threat. Frauds within the banking sector also pose risks to reputation and operations, potentially eroding customer trust and carrying implications for financial stability, the RBI report notes. While setting up strong systems, banks need to improve the customer services they provide to the victims of such frauds.
