Frauds in Banking Sector and Role of AI in Fraud Management

The banking sector, a cornerstone of the Indian economy, plays a critical role in driving financial inclusion and stability. However, it has not been immune to fraudulent practices, which jeopardize not only the financial institutions but also the trust of the populace.

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Introduction

The banking sector, a cornerstone of the Indian economy, plays a critical role in driving financial inclusion and stability. However, it has not been immune to fraudulent practices, which jeopardize not only the financial institutions but also the trust of the populace. Understanding fraud perpetrators, their methodologies, and motivations is vital to curtailing these malpractices. This article delves into the landscape of banking frauds in India, providing insights into why and how they occur and suggesting robust measures for prevention.

The Landscape of Banking Frauds in India

Banking frauds in India have been a growing concern, reflected in increased incidences of large-scale financial crimes. According to the Reserve Bank of India (RBI), the financial year 2021-22 witnessed a total of 9,103 frauds involving ?60,389 crore in the Indian banking sector. Latest RBI report highlights a significant rise in the number of banking frauds to 36,075 in the fiscal year 2023-24, marking a year-on-year increase. However, on the positive side, the total amount implicated in these frauds saw a substantial decrease of 46.7%, amounting to Rs 13,930 crore

Indians lost more than Rs 1,750 crore to cyber criminals in the first four months of 2024 with over 7 lakh 40 thousand cybercrime complaints being registered on the National Cybercrime Reporting Portal run by the ministry of home affairs between January to April 2024. According to Indian Cyber Crime Coordination Centre (I4C), on an average 7,000 cybercrime complaints were registered per day in May 2024, a jump of 113.7% between 2021-2023 and 60.9% from 2022-2023, and 85%of them were financial only

These figures, while alarming, underscore the pressing need for stringent controls and vigilant monitoring.