The Reserve Bank of India (RBI) has unveiled a paradoxical trend in the banking sector's battle against fraud. While the total number of reported fraud cases has seen a dramatic decline, the financial value involved has surged significantly, according to the central bank's 'Trends and Progress of Banking in India' report for 2024-25.
A Tale of Two Trends: Fewer Cases, Higher Stakes
The data for the first half of the financial year 2025-26 reveals a stark contrast. By the end of September, banks reported a total of 5,092 fraud cases. This figure is substantially lower than the 18,386 cases logged in the same period a year ago. However, the silver lining is clouded by the financial impact. The total value of these frauds rose to ₹21,515 crore between April and September, up from ₹16,569 crore in the corresponding period last year.
The RBI's report underscores the multifaceted threat posed by such incidents, stating they expose financial institutions to reputational, operational, and business risks while simultaneously eroding customer trust.
Supreme Court Ruling and High-Value Frauds
This rise in fraud value continues a pattern observed in the previous fiscal year, 2024-25. That year saw 23,879 frauds amounting to ₹34,771 crore, compared to 36,052 frauds worth ₹11,261 crore in 2023-24. The RBI clarified that the sharp increase in value was largely attributable to a Supreme Court judgment from 27 March 2023.
In the case of 'State Bank of India & Ors. v. Rajesh Agarwal & Ors', the apex court upheld a borrower's right to be heard before their account is classified as fraudulent. This led to the re-examination and fresh reporting of 122 legacy fraud cases, totalling ₹18,336 crore, in compliance with the ruling. Consequently, as of 30 September, banks had to withdraw 942 frauds amounting to a staggering ₹1,28,031 crore from their records due to non-compliance with the principles of natural justice.
On a positive note, the share of high-value frauds (₹1 lakh and above) appears to be shrinking. So far in 2025-26, banks reported only 509 such frauds totalling ₹11 crore, a massive drop from 11,615 cases worth ₹3,497 crore in 2024-25.
Card Frauds Dominate, PSBs Bear the Brunt of Value
Breaking down the types of fraud, the report highlights that card and internet-related frauds constituted 66.8% of all cases reported in 2024-25. Frauds related to bank advances followed at 33.1%.
Private sector banks accounted for 59.3% of the total number of reported frauds, primarily driven by card and internet frauds in volume. However, in terms of the sheer monetary value involved, public sector banks (PSBs) led, accounting for 70.7% of the total amount. For PSBs, advance-related frauds were the most significant contributor, both in number and value.
The report noted an increase in advance-related frauds across most bank groups, partly due to the reclassification of many legacy frauds under this category.
Regulatory Push for a Safer Digital Ecosystem
In response to the growing menace of digital fraud, the RBI is actively collaborating with stakeholders like the Ministry of Home Affairs. Key initiatives include:
- A principle-based framework for authenticating digital transactions and securing internet domains.
- The development of 'MuleHunter.ai', a platform to identify money mule accounts, already implemented in 23 banks as of 17 December.
- The introduction of a Digital Payments Intelligence Platform (DPIP) to use artificial intelligence for flagging risky transactions and sharing fraud intelligence.
The regulator has urged all regulated entities to strengthen internal controls, ensure adequate grievance redressal mechanisms, and enhance digital financial literacy among customers. The ongoing effort marks a critical step towards building a more resilient and trustworthy banking environment for India.
