Banking Frauds in India

7/27/2019 Banking Frauds in India

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Over the last few years, India has been one ofthe worlds fastest growing economies withbanking and financial services companies

experiencing significant growth both in size andprofitability. In the last decade, the Indianbanking sector grew at an average of 18 percentcompared to over 7 percent GDP growth.

So frauds in the financial services industry pose asignificant risk to institutions, as well as to theintegrity of capital markets. Its effect can bewidespread, causing long term financial andreputational damage.


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336 million debit cards, 19 million credit cards,1,20,000 ATMs, nearly 9,00,000 POS terminals, 18

prepaid service providers authorized by RBI,

transaction level of 45 million debit cardtransactions for Rs 7,000crores in value per month

and 31 million credit cards transactions for Rs 12,000

crore in value per month shows that the cardpayment industry is no longer small as it used to be5 years back.


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A bank is typically exposed to

different types of frauds.

APPLICATION FRAUD

LOST/ STOLEN CARDS

ACCOUNT TAKEOVER


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Erasing the magnetic strip

Creating a fake cardAltering card detailsSkimmingWhite plastic


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MERCHANT COLLUSION TRIANGULATION

INTERNET RELATED FRAUDS:Site cloningFalse merchant sitesCredit card generators


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The most observations state lack ofoversight by line managers or senior

managers on deviations from existingprocess/controls.

One of the major reasons followed bycurrent business pressure to meet targetsand difficult business scenario as other twomajor reasons for increasing fraud incidents.


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It appears that a majority of the incidents are still detectedthrough a formal and informal complaint mechanism.

Technology appears to be gaining prominence in frauddetection. Many of the respondents indicated that theydetected fraud using a fraud detection/analytics tool.

Time for detection of fraud: According to secondaryinformation, the average time taken to discover a fraudincident is more than six months and discovery of some ofthem took greater than a year.


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Frauds are an inseparable part of any business. And soBanks too will have to deal with frauds no matterwhat level of security and scrutiny they build in. This is

further complicated by the fact that fraudsters keepdevising newer techniques of executing financialfrauds. This requires banks to invest in state-of-the-art IT systems to monitor, detect, block, investigate,analyze and prevent fraudulent transactions.Complicated models need to be developed which arecapable of identifying fraud transactions by assigningit a fraud risk score.


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Banking Frauds in India

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