Bank Frauds in India Triple to ₹36,000 Crore: How Steps Are Being Taken to Tackle the Surge

Bank frauds in India have surged, driven largely by a spike in UPI and digital transaction scams. According to the Reserve Bank of India, more than half of these frauds occurred via card-based or online channels.

In response, financial regulators are introducing technological upgrades and new security layers to address this growing threat. With digital payments becoming the norm, such proactive measures are becoming critical for safeguarding users.

Rise in Bank Frauds and What the Numbers Reveal

The Reserve Bank of India (RBI) has reported a sharp rise in the value of bank frauds, with the amount involved increasing by 194% nearly threefold, to ₹36,014 crore in the year ending March 2025, compared to ₹12,230 crore in the previous year. This surge is largely due to revisions in fraud classification and the reporting of additional cases from earlier years. Interestingly, the total number of fraud cases declined to 23,953 in 2024–25 from 36,060 in the previous year, with private sector banks accounting for 59.42% of the reported incidents.

Traditional Loan Frauds Continue, But Digital Channels Are More Vulnerable

Loan frauds involving fake documentation or bribery have long been an issue in the Indian banking system. However, recent trends show that more than 50% of fraud cases now originate from card or digital payment channels. This is despite these channels accounting for only 1.4% of the total fraudulent value. The contrast underscores how digital transactions, while efficient, are increasingly becoming targets for scammers.

UPI’s Explosive Growth Brings New Security Challenges

The Unified Payments Interface has revolutionised how people transfer money in India. It facilitates over $3 trillion in transactions annually and supports instant, 24/7 payments at no cost for most users. However, with over a million scams being reported each year, the system’s very popularity has created a fertile ground for fraud. Tactics range from phishing attempts to SIM cloning, and many users may not even realise they are being targeted until it is too late.

Identity Theft and the Threat of Account Mules

India’s digital infrastructure, including biometric-based identity verification through Aadhaar, was built to enhance security. Yet fraudsters have learned to navigate around these safeguards. Identity theft continues to grow, with fraudsters creating accounts using real identities and using them for illegal activities. These mule accounts are often linked to activities such as cryptocurrency transfers and online betting, frequently bypassing conventional checks.

RBI’s Tech-Focused Response: MuleHunter.ai and More

To counter the rising fraud, the Reserve Bank of India has turned to artificial intelligence. Its innovation hub has developed MuleHunter.ai, an advanced tool designed to detect suspicious accounts being used for illicit purposes. Alongside this, the central bank is working on a broader intelligence platform that can monitor digital payments across the ecosystem. These technological steps mark a shift towards proactive risk management.

Read More: UPI Apps Like Paytm and GPay to Show Only Real Beneficiary Names from June 30, 2025 to Curb Frauds! 

SEBI’s Role in Enhancing Investor Payment Safety

While legislative reforms are still catching up, India’s capital markets regulator has introduced specific measures to curb fraud. Starting in October, brokers, investment advisers, mutual funds, and other financial entities must use a “@valid” suffix on their virtual payment handles. This initiative by SEBI aims to help investors identify authentic payment sources, reducing the chances of being duped by fake handles.

Conclusion

The ₹33,200 crore rise in bank frauds is not just a statistic; it is a call to action. While fraudsters continue to innovate, so are the regulators and institutions. From AI-based fraud detection systems like MuleHunter.ai to mandatory verification layers for payment handles, India’s financial ecosystem is taking significant steps to curb fraud. These efforts reflect a much-needed alignment between technology, regulation, and consumer awareness in the fight against financial crime.

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