Banks Suggest RBI Steps on How to Tackle Online Frauds in India

Banks suggest ways to tackle online frauds

There has been a significant rise in online banking fraud in India and the Indian Banks Association (IBA) is not happy about it.

IBA, which includes 229 banks, has asked the Reserve Bank of India to bring in more safety features as online frauds in India are evolving in terms of their modus operandi. With the advent of newer technologies and ways to make digital payments, cyber criminals come up with newer and innovative ways to scam people.

According to an RBI note, cases of online frauds in India rose from one in 59,000 transactions in Q3 of FY 2021-22 to one in every 55,653 transactions Q4 of FY 2022-23. [Link]

Another report by RBI said that before 2019-20, the biggest category of financial fraud was related to “advances”. However, that has changed post 2020-21, and most of the financial fraud cases belong to internet based transactions.

“During the quarter ended March-2023… for every Rs 1 lakh of digital payment value processed during the said quarter, Rs 1.45 was fraudulent,” the RBI note said.

Current Safety Measures Taken by RBI

In October last year, RBI had launched DAKSH, a web-based workflow system to keep an eye on online banking fraud cases, monitor compliance requirements that NBFCs and banks are supposed to follow, and see how it can be improved.

During its launch, RBI had said that the objective of DAKSH is to improve the compliance culture in Supervised Entities (SEs) like banks, NBFCs, etc.

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The application will also enable seamless communication, inspection planning and execution, cyber incident reporting and analysis, provision of various MIS reports etc.

The central bank added that based on market intelligence and incidents reported by REs (regulated entities), “confidential advisories are issued to them for sensitising them about the threat and to enable them to take prompt preventive/corrective action.”

RBI Report: Comparison of financial fraud between 2019 to 2023

What Do Banks Want to Reduce Online Fraud?

IBA has written to the RBI asking the central bank to take strict measures for putting an end to online banking fraud. A few measures that IBA has suggested are as follows:

  • Limit transactions on new bank accounts: IBA suggested that newly opened current and savings accounts should have a fixed threshold on the number of transactions. This can be based on the financial soundness of account holders. Special attention should be given to accounts that frequently transact with high-risk merchants.
  • Database of fraudsters’ accounts: IBA has requested the central bank to create a central ‘negative registry’ of known fraudsters. All banks should have easy access to this database.
  • Power to cease fund flow: Banks have requested the RBI to take strict and immediate action against the person behind the fraudulent act. Once an online fraud has been reported and the bank account that receives the fraudulent or theft amount, should be immediately blocked. IBA has requested the RBI to create a standard operating procedure to stop the flow of funds once an online fraud is identified and reported.
  • Better reporting system: To strengthen online banking fraud protection, banks have suggested a better and more effective way to communicate with the law enforcement agencies regarding online fraud. A state-wise centralised contact centre can be established to send and receive information about cyber fraud between banks and law enforcement agencies for faster and uniform resolution.

Frequently Asked Questions

Question 1: What does the RBI suggest as safety measures to tackle cyber thefts and online fraud?

Answer: RBI proposes that customers should follow safe banking practices such as the following –

  • Keep changing passwords and don’t share it with anyone
  • Be wary of emails and text messages that claim they are from banks. Don’t click on any links in such messages
  • Don’t download any app from unknown sources or devices
  • You don’t need to provide your OTP or passcode to receive money in your account
  • Double-check the spelling of the bank’s website – there are chances that you might provide your details on a fake website
  • While entering your PIN code in an ATM, be aware that no one is standing just behind you and reading your PIN code

Question 2: How can one make an online fraud complaint to RBI?

Answer: If you have been impacted by an online fraud case, you should immediately call 1093 to report online bank frauds in India.

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