Rise In Online Fraud A Challenge For India's Digital Economy

The rising number of cyber fraud cases has become a cause for concern for the authorities. Not only have citizens been robbed of their hard-earned money, but depleted their savings too. 

The Reserve Bank of India (RBI) on Friday asked banks and non-banking financial companies (NBFCs) to develop robust incident response and recovery mechanisms to combat this menace, which is growing at an alarming rate.

The RBI has decided to introduce bank [dot] in — an exclusive internet domain for all Indian banks. The move is aimed at curbing the exponential surge in digital banking fraud cases. The new domain has been created to help customers in identifying genuine and legitimate bank websites.

The central bank also urged retail banks and NBFCs to continuously upgrade and improve upon their respective detection mechanisms to address the menace.

“The surge in digital fraud is a matter of concern, warranting action by all stakeholders,” RBI Governor Sanjay Malhotra said, while addressing the media after the bi-monthly monetary policy committee (MPC) meeting.

“Banks and NBFCs must continually improve preventive and detection measures to mitigate cyber risks. They must develop robust incident response and recovery mechanisms, reinforced through periodic testing, for operational resilience,” Malhotra added.

According to an RBI report, the number of bank frauds rose exponentially to 18,461 cases in the first half of the current financial year. What is even more concerning is the surge in the amounts involved in these cases, which rose more than eight-fold to Rs 21,367 crore, compared to the corresponding period in the previous year.

In December 2024, the Department of Financial Services (DFS) had organised a ‘Coordination Meeting on Vigilance Matters of Public Sector Banks (PSBs)’ to enhance cooperation among different departments, the Central Bureau of Investigation (CBI) and public sector banks, for expediting investigations in bank fraud cases.

According to data portal Statista, states like Telangana, Maharashtra, Andhra Pradesh and Uttar Pradesh reported the maximum number of online banking frauds in 2022. 

The authorities need to tackle this rising threat, which can dent the image of the Indian financial services sector, while raising operational and business risks. 

More importantly, the rise in cyber frauds could pose a serious challenge for India’s digital framework, and even dent the government's drive towards a cashless economy.