Fraud Cases In Banking Sector Rise In First Half Of FY24: RBI
The number of frauds in the banking sector during the first half of the current financial year has increased substantially to 14,483 cases, says RBI report
The number of frauds in the banking sector during the first half of the current financial year has increased substantially to 14,483 cases, although the amount involved is only 14.9 per cent of the previous year's amount, according to a RBI report.
The report on Trend and Progress of Banking in India 2022-23, underlined the need to protect the banking system and the payments system from the risks of fraud and data breaches emanating from cyber threats.
As many as 14,483 frauds were reported involving an amount of Rs 2,642 crore in the first half of current financial year, as compared to 5,396 cases (Rs 17,685 crore) in the same period a year ago.
Frauds lead to reputational, operational and business risk for banks and undermine customers’ trust in the banking system with financial stability implications, it said.
During 2022-23, the total amount of frauds reported by banks declined to a six-year low, while the average amount involved in frauds was the lowest in a decade, it added.
Based on the date of occurrence of frauds, the average amount involved declined during 2022-23, with the number of cases concentrated in card or internet-related frauds, it said.
With the adoption of new technology, it said, the risks of cyberattacks, data breaches and operational failures have also increased.
Going forward, it said, banks need to better recognise and address these technology and cyber security risks to minimise potential vulnerabilities.
The evolving nature of risks faced by the banking system necessitates building resilience through good governance and robust risk management practices, it said.
The report said, Scheduled Commercial Banks (SCBs) in India, too, are leveraging AI for data analytics, fraud detection and other predictive analyses.
Banks have also deployed chatbots or virtual assistants to improve customer experience, it said.
The rise of artificial intelligence (AI) embodies the potential to revolutionise various aspects of banking, non-banking and financial markets, it said, adding, some AI technologies have been around for more than five decades.
Advances in computing power, availability of enormous quantities of data and new algorithms have led to major AI breakthroughs in recent years. AI is increasingly being used in areas such as asset management, algorithmic trading, credit underwriting, and blockchain-based financial services.
AI is expected to transform financial services segment by spurring the creation of new products and services, opening up new markets and industries, and paving the way for innovation.
"Fraud detection, optimisation of information technology (IT) operations and digital marketing are some other areas where widespread adoption and heavy use of AI tools has been reported," it said.
Banks can reap the benefits of such applications through more efficient use of resources enabling better customer experience, it said, adding, Machine learning (ML) techniques allow real-time analysis of customer transactions to improve estimates of default risks which strengthens their risk management strategy.
To address concerns relating to unbridled engagement of third parties, misselling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, and unethical recovery practices, the RBI released guidelines on digital lending in September 2022 to support orderly growth of credit delivery through digital lending methods.
(This report has been published as part of the auto-generated syndicate wire feed. No editing has been done in the headline or the body by ABP Live.)
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