Fraud Cases in Public Sector Banks increase Six Times in FY24

Instances of fraud in public sector banks (PSBs) surged nearly sixfold in the 2023-24 fiscal year compared to the previous year, rising from 4,787 to nearly 28,000. This significant increase was revealed through an analysis of the annual reports from eight PSBs.

Types of Frauds

The reported frauds encompassed a variety of types, including both borrowing and non-borrowing frauds such as digital and cyber frauds.

Bank of Baroda and Punjab National Bank Lead in Fraud Cases

• Bank of Baroda: Recorded the highest number of fraud cases in FY24, with 12,061 incidents, a stark increase from the 784 cases reported in FY23.
• Punjab National Bank (PNB): Reported 7,112 fraud cases in FY24, compared to 289 in the previous fiscal year.

Areas Most Affected by Fraud

Most fraud cases in PSBs were concentrated in the digital payments and cards businesses, with additional cases in the loan portfolio. The Reserve Bank of India (RBI) corroborated this trend in its FY24 annual report, highlighting a 708 percent increase in online fraud cases over the past two years, reaching 29,082 cases.

State Bank of India’s Decline in Fraud Cases

Contrary to the trend, the State Bank of India (SBI) reported a decrease in fraud instances. In FY24, SBI documented 1,586 fraud cases, a 42 percent decline from the 2,755 cases reported in FY23. These included cases involving compromised customer credentials such as OTPs, card verification values, and passwords.

Reduction in Fraud Amounts

Despite the rise in the number of fraud cases, the total amount involved in these frauds decreased significantly. This reduction is attributed to the predominance of small-ticket online and card transactions in the frauds reported.

• Overall Fraud Amount: Dropped from Rs 15,236 crore in FY23 to Rs 7,134 crore in FY24, a 52 percent decline.
• SBI: Reported a reduction in fraud amounts from Rs 4,878 crore in FY23 to Rs 3,406 crore in FY24.
• PNB: Maintained a consistent fraud amount of Rs 1,803 crore in both FY23 and FY24.

Measures to Combat Fraud

Banks and regulators are intensifying their efforts to curb fraudulent activities. Over the past three years, banks have significantly increased their investments in information technology (IT) infrastructure to combat cyber risks and enhance technology-related capabilities.

• Indian Overseas Bank: Plans to increase its IT investment by 15-20 percent in FY25, following an expenditure of around Rs 1,100 crore on cyber security and other measures.
• Bank of Maharashtra: Increased its IT infrastructure spending from Rs 800 crore in FY23 to Rs 900 crore in FY24, with plans to exceed Rs 1,000 crore in FY25.
• HDFC Bank: Allocates about 7 percent of its total expenditure to IT, adjusting its spending as per the typical investment cycle.
• Axis Bank: Spent 9.3 percent of its total operating expenses of Rs 9,319 crore on technology and digital initiatives in Q4FY24, crediting its strong product position to continuous investment in people, processes, and technology over the past five years.