Context:

In its latest Report on Trend and Progress of Banking in India 2024–25, the Reserve Bank of India (RBI) has highlighted a troubling paradox in India’s banking system: while the number of reported bank fraud cases has declined, the total amount involved has risen sharply. This divergence reflects evolving fraud typologies, increasing sophistication of financial crimes, and supervisory challenges amid rapid digitisation of banking services.

Key Findings of the RBI Report:

Decline in Number, Rise in Value of Frauds

• • • Total fraud cases (2024–25): 23,879, down from 36,052 in 2023–24
    • Total amount involved: ₹34,771 crore, up sharply from ₹11,261 crore in the previous year

The RBI attributed the significant increase in the value of frauds primarily to the re-examination and fresh reporting of 122 cases amounting to ₹18,336 crore. This followed compliance with the Supreme Court judgment dated March 27, 2023, which mandated adherence to due process before classifying borrowers as fraud.

Recent Trends (April–September 2025–26)

• • • Number of fraud cases: Declined to 5,092 from 18,386 in the corresponding period of the previous year
    • Amount involved: Increased to ₹21,515 crore from ₹16,569 crore

These trends suggest that large-value frauds continue to dominate the fraud landscape, even as the overall incidence of frauds declines.

Nature of Bank Frauds:

By Type

• • • Card and Internet Frauds:
      • Accounted for 66.8% of total fraud cases (by number) in 2024–25
    • Advances-Related Frauds:
      • Contributed 33.1% of the total fraud amount, making them the most significant in value terms

While digital frauds dominate numerically, loan-related frauds pose the greatest systemic and financial risk.

By Bank Category:

• • • Private Sector Banks (PSBs):
      • Accounted for 59.3% of total fraud cases (by number)
      • Card and internet frauds dominated in volume
    • Public Sector Banks (PVBs):
      • Accounted for 70.7% of the total fraud amount
      • Advances-related frauds dominated both in number and value

The RBI observed that the rise in advances-related frauds across bank groups was largely due to the reclassification of earlier cases, many of which were linked to large corporate loans.

Resilience of the Banking Sector:

Despite the increase in fraud values, the RBI underscored the overall resilience and soundness of India’s banking system.

Financial Health Indicators:

• • • Balance sheet growth (SCBs): 11.2% in 2024–25
    • Credit growth: 11.5%
    • Deposit growth: 11.1%

Profitability and Capital Adequacy:

• • • Return on Assets (RoA): Improved across bank groups
    • Capital to Risk-Weighted Assets Ratio (CRAR):
      • 17.4% (March 2025)
      • 17.2% (September 2025)
      • Well above regulatory minimum requirements

Asset Quality:

• • • Gross NPAs:
      • Declined to a multi-decadal low of 2.2% in March 2025
      • Further improved to 2.1% by September 2025

Urban co-operative banks and Non-Banking Financial Companies (NBFCs) also reported improved asset quality and strong capital buffers.

Emerging Challenges Identified by the RBI:

·        Rising Large-Value Frauds: Increasing concentration of fraud risk in fewer but high-value cases.

·        Digital and Cyber Risks: Rapid digitisation has heightened exposure to cyber frauds and operational vulnerabilities.

·        Growing Competition from Non-Banks: NBFCs and fintech firms are intensifying competition in credit markets, raising regulatory and supervisory challenges.

·        Governance and Risk Management Gaps: Persistent weaknesses in corporate governance, credit appraisal, and post-sanction monitoring mechanisms.

Way Forward:

The RBI emphasised the need for:

·        Stronger risk assessment and internal control frameworks

·        Responsible and secure adoption of digital technologies

·        Enhanced consumer awareness, education, and protection

·        Improved corporate governance standards

·        Robust fraud detection, reporting, and early-warning systems

Balancing financial inclusion and innovation with systemic stability remains a central policy challenge for India’s banking sector.