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Cyber Fraud in Banking Transaction surge in FY 2024
Context:
India’s rise in digital transactions has led to increased cyber frauds. From FY2020 to FY2024, ₹3,207 crore was lost across 5,82,000 cases, as per RBI data obtained via RTI. This issue is critical as digital transactions are expected to rise this festival season.
Key Trends in Cyber Fraud:
- Sharp Increase in FY2024: FY2024 saw cyber fraud cases jump from 75,800 in FY2023 to 2,92,800, with losses climbing from ₹421.4 crore to ₹2,054.6 crore.
- High Fraud Losses in Maharashtra and Tamil Nadu: Maharashtra led with over 25% of fraud losses, followed by Tamil Nadu at 23%, largely due to high online transaction volumes in Mumbai.
- Private Banks Face Higher Fraud Cases and Losses: Private banks have a higher number and value of fraud cases than public banks. FY2024 saw a rise in both cases and losses, with private banks experiencing a steeper increase.
- Top Banks Affected: Kotak Mahindra, Axis, SBI, HDFC, and ICICI consistently had the most fraud cases, accounting for 62% of total fraud losses and 53% of cases over five years. Private banks appear more vulnerable to cyber attacks.
Reasons for Increased Cyber Frauds:
- Rapid Digital Growth Outpacing Security: The expansion of digital transactions outpaced cybersecurity efforts, leaving users vulnerable.
- Limited User Awareness: Many users lack knowledge of secure practices, increasing susceptibility to phishing and scams.
- Complex Security Features: Banks’ complex security protocols often confuse users, leading to potential security bypasses.
- Rise in Sophisticated Attacks: Cybercriminals increasingly use advanced techniques like malware, SIM swaps, and spoofing to exploit banking and user device vulnerabilities.
- Private Bank Vulnerabilities: Private banks, focused on user-friendly experiences, may lack robust security compared to public sector banks.
- Regulatory Gaps: Delays in cybersecurity policies and response systems have created exploitable gaps.
- Weak Data Protection Laws: While India has passed a data protection law, it’s still evolving, leaving personal information at risk.
- Time Lag in Fraud Detection: RBI’s report reveals delays in detecting frauds, with 89.2% of FY2024 fraud losses stemming from incidents in prior years, similar to 94% in FY2023.
- Digital Transactions Surge Since 2012: Digital payments in India rose 90 times in 12 years. RBI reported a jump from 162 crore digital transactions in 2012-13 to 14,726 crore by early 2024, driven by demonetisation and the COVID-19 lockdown.
- Cybersecurity Gaps in Digital Push: Digital transactions were promoted to reduce tax evasion and corruption, but security measures lagged, making users vulnerable to fraud. Complex bank security systems may further deter users.
Government and RBI Actions to Combat Cyber Fraud:
- Government-Fintech Collaboration: The Centre recently worked with fintechs and law enforcement to address fraud issues.
- OTP Alert System: The Ministry of Home Affairs collaborated with SBI and telecoms to develop an OTP alert system to combat phishing.
- SEBI Advisory: SEBI warned investors about fraudulent trading platforms.
- Digital India Trust Agency: The RBI plans to create an agency to monitor illegal lending apps.
RBI’s Real-Time AI System for Cyber Fraud Detection
The Reserve Bank of India (RBI) is introducing an AI-driven, real-time system to detect and prevent cyber fraud across the banking sector. Key features include:
- Real-Time Monitoring: Instant tracking of transactions to flag suspicious activity immediately.
- Pattern Recognition and Behavioral Analysis: Machine learning to identify unusual transaction patterns and deviations from typical user behaviour.
- Automated Response: Automatic actions, like account freezing or additional authentication, to prevent fraud from proceeding.
- Integration Across Banks: Centralised data collection from public and private banks for comprehensive monitoring.
