RBI Governor Calls for Collective Action to Tackle Rising Digital Fraud

Reserve Bank of India Governor Sanjay Malhotra has called on banks, non-banking financial companies, and other regulated entities to work together to counter the growing threat of digital fraud. 

Speaking on Friday, Malhotra said collaboration across institutions is critical to protecting customers and maintaining trust in the financial system, especially as digital transactions continue to expand rapidly.

Strengthening Individual and Collective Defences

While individual financial institutions must strengthen their own tools, techniques, and internal processes, Malhotra stressed that collective efforts are equally important. 

He said shared analytics and systems can help detect mule accounts and suspicious transactions at an early stage, allowing risks to be addressed pre-emptively before losses escalate across the system.

Digital Fraud Trends and RBI Data

According to the RBI’s annual report, the value of digital payment frauds at banks declined to ₹520 crore in FY25, involving 13,516 transactions, compared with ₹1,457 crore and 29,082 transactions in FY24. 

Despite the reduction in reported fraud value and volume, the RBI believes continued vigilance is necessary given the evolving nature of cyber and digital threats.

Focus on Mule Accounts and Technology Tools

Malhotra highlighted mule accounts as a key concern, noting that these accounts often remain dormant before suddenly recording a surge in low-value, high-volume transactions. 

The RBI has introduced tools to help banks identify such accounts, including the Mule Hunter system. Malhotra said in November that the tool has shown a strong success rate in identifying potential fraud risks.

Balancing Innovation and Consumer Protection

The RBI governor cautioned that while digital channels have improved financial inclusion and convenience, the absence of proper safeguards can lead to opaque pricing, weak disclosures, and inappropriate recovery practices. 

He said digitalisation and innovation must remain aligned with fair outcomes for consumers, adding that protecting customers from rising digital frauds has drawn national attention.

Evolving Supervisory Approach

Malhotra also said the RBI intends to shift supervision increasingly towards off-site and near real-time monitoring rather than periodic on-site inspections. This approach will rely more on supervisory technology and AI-enabled tools, while ensuring judgment and accountability remain with human supervisors. Similar tools may also support evidence-based rule-making.

Also Read: List of 35 NBFCs Whose Registration Was Cancelled by RBI!

Conclusion

Emphasising that enforcement is not meant to be punitive, Malhotra said the RBI’s objective is to course-correct and set clear standards of conduct. With smaller penalties levied in 2025 despite a rise in enforcement actions, the regulator aims to strengthen compliance while encouraging collaboration, technology adoption, and customer protection across the financial system.

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