Rising digital frauds: Reserve Bank of India Governor Sanjay Malhotra recently highlighted the growing menace of cybercrimes in India and the urgent need for robust systems to curb financial fraud. Over the past two years, digital fraud and IT-related risks have increased multi-fold due to rapid advancements in artificial intelligence and technology. This has necessitated enhanced oversight by banks, particularly over third-party service providers.
Between April and September, 18,461 cases of fraud were reported, amounting to Rs 21,367 crore. This represents a sharp increase from the previous year, which saw 14,480 cases involving Rs 2,623 crore. The number of fraud incidents surged by nearly 28%, while the total financial losses skyrocketed more than eight-fold. A significant challenge is that many digital fraud cases go unreported due to a lack of awareness. This mirrors a global trend, with a TransUnion report indicating that 4.6% of all digital customer transactions worldwide are suspected to be fraudulent.
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Rise of UPI and digital frauds
The RBI, in its latest circular, noted that while digital transactions offer convenience and efficiency, they have also led to a surge in cyber fraud. Mobile numbers now play a crucial role in authentication and verification, serving as key identifiers for financial transactions. However, scammers exploit this dependency by using stolen or duplicated numbers to initiate various types of online fraud.
India is particularly vulnerable to severe data breaches, exposing sensitive information to malicious actors. The country operates the world’s largest biometric digital identity program, Aadhaar, which has been issued to over one billion people and is increasingly required for financial transactions. Fraudsters manipulate technology to breach data security, extracting personal information that victims believe is accessible only to government authorities. This enables scammers to make fraudulent demands appear credible.
Unlike traditional petty crimes, organised digital frauds are not merely the work of financially desperate individuals. Instead, they involve a new class of criminals equipped with sophisticated tools. According to experts, one major factor behind the surge in cyber fraud is India’s overburdened and underprepared telecom infrastructure. Fraudsters exploit weaknesses in telecom networks to overwhelm unsuspecting victims with deceptive calls and messages, creating fertile ground for cybercrime.
Growing sophistication of cybercriminals
Cybercriminals employ increasingly sophisticated techniques that often outmanoeuvre law enforcement and security systems. A particularly alarming scam, known as “digital arrest,” has emerged in recent years. In this…
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