Finance Ministry, RBI earmark measures to safeguard public from being defrauded by scamsters

RBI issues advisories to people, alerting them against such fraudsters’ practices

August 28, 2022

As fraudsters get smarter, RBI, banks get busy plugging loopholes

Amid rising newer techniques being used by fraudsters, the Reserve Bank of India (RBI) has issued ‘master directions’ for the classification and reporting of frauds by commercial banks and select financial institutions.

The Finance Ministry and the RBI have earmarked measures to safeguard the general public from being defrauded by scamsters posing as bank employees, financial advisors, and loan agents.

Banking frauds have taken varied dimensions with the passage of time. With the advent of the digital age and online transactions, however, fraudsters too have upgraded their skills and latched on to innovative methods to rob unsuspecting people of their hard-earned money.

Some other reasons which lead to bank fraud are collusion between the borrowers and third-party agencies like valuers, advocates, chartered accountants, etc., lack of awareness regarding the mechanism to detect early warning signals, and lack of awareness among customers.

Banks on their part are required to report fraud cases to law enforcement agencies. In addition to this, the RBI issues advisories to people, alerting them against such practices. It cautions them to be aware of fraudulent messages, spurious calls, unknown links, false notifications, and unauthorized QR codes.

Finance Ministry sources said that fraudsters attempt to get confidential details like user ID, login details, transaction passwords, one-time password (OTP), debit and credit card details, PIN, CVV, and other personal information of people, to swindle money from them.

Industry watchers said that banking frauds mainly occur due to various reasons like non-adherence to know your customer (KYC) norms while opening accounts and also due to non-compliance with the laid down standard operating procedures or regulatory guidelines for deposit and loan accounts.

Amid rising cybercrime incidents, the RBI has issued instructions on cyber security framework in banks and has made it mandatory for all scheduled commercial banks to report all unusual cyber incidents to it within two to six hours of their occurrence.

The RBI on June 2, 2016, issued a comprehensive circular on cyber security framework in banks, under which financial institutions were advised to put in place a board-approved cyber security policy highlighting the strategy to counter cyber threats, considering the level of complexity of business and the risk involved.

Also, ‘Guidelines on Cyber Security Controls’ for third-party ATM Switch Application Service Providers (ASPs) were also issued by the RBI on December 31, 2019.

Interestingly, as per RBI data, cyber frauds reported by scheduled commercial banks related to ATM or debit cards as well as credit cards and internet banking have come down in terms of the amounts involved in them.

From Rs.185 crore in 2019-20, the amount involved in cyber frauds came down to Rs.160 crore in 2020-21, marking a decline of 15 percent year on year. This amount further fell to Rs.128 crore in 2021-22, a year-on-year decline of 17.5 percent, the RBI data showed.

Yet, despite all the preventive measures in place to curb the rise of cybercrimes like ATM card hacking and internet banking fraud, such cases occur in large volumes every year, mainly due to a lack of awareness about online banking among millions of people in the country who live in rural areas and don’t have access to the internet or smartphones, industry watchers said. Also, there is a sizeable population that is not computer literate and this is also a major reason behind the occurrence of such frauds, they added.

[With Inputs from IANS]

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