Banks Reintroduce In-Person Verification to Curb Digital Fraud and Mule Accounts

As per report by Economic Times, in response to escalating digital fraud, banks are reverting to in-person verification methods. This shift aims to curb the rise in identity theft and mule accounts, which have become prevalent with fully online account openings. 

Digital Fraud Prompts Return to Physical Verification 

Amidst a surge in digital fraud, several major banks, including ICICI Bank, HDFC Bank, State Bank of India, Bank of India, and Bank of Baroda, have paused their fully digital onboarding systems. Customers are now required to visit branches for document verification or meet bank officials at home for identity checks.  

This move follows recent penalties imposed by the Reserve Bank of India (RBI) on banks for inadequate Know Your Customer (KYC) compliance during online onboarding. 

ICICI Bank Discontinues Instant Account Service 

ICICI Bank has completely halted its instant online account-opening service, except for salary accounts. Other customers must now complete the process through an assisted model, where a branch executive visits them to finalise the paperwork digitally.  

HDFC Bank, however, continues digital onboarding but is enhancing its systems for greater security. 

Read More: RBI Proposes Full Disclosure of Forex Transaction Costs for Retail Customers! 

RBI Data Reveals Trends in Bank Frauds 

Recent RBI data reveals a decline in the number of bank fraud cases in FY25, with 23,953 incidents reported, a 34% drop from the previous year.  

However, the total value of these frauds surged nearly threefold to ₹36,014 crore. Private-sector banks reported the highest number of frauds, with 14,233 cases, while public-sector banks experienced the largest financial losses, amounting to ₹25,667 crore. 

Digital Payments and Loan Frauds 

Digital payments, including card and internet transactions, accounted for 13,516 fraud cases, representing over 56% of all incidents, involving ₹520 crore.  

However, the most significant losses were in the loans segment, with advances accounting for 7,950 fraud cases and over 92% of the total fraud amount, totalling ₹33,148 crore.  

Most frauds in private banks occurred in digital payments, while public-sector banks faced major frauds in loan portfolios. 

Conclusion 

The reintroduction of in-person verification by banks highlights the challenges posed by digital fraud. While digital onboarding offered convenience, the rise in fraud cases has necessitated a return to more secure verification methods. This shift aims to strengthen customer identity checks and reduce the prevalence of fraudulent activities. 

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