Bank fraud in India: Who's really at risk?

Earlier this month, IDFC First Bank reported it had been the victim of a fraud in which four of its current and former employees connived to siphon off ₹590 crore from the bank account of a Haryana government department. The theft was uncovered when the department tried to close its account with the bank and found a discrepancy between the account balance in its records and the actual balance.While the Haryana government subsequently said it had recovered all its money, the incident underscores the risks of banking fraud, especially as the number of digital transactions increase, enabling new methods of fraud.Indian banks reported 11,615 cases of fraud involving ₹3,497 crore in 2024-25. Both figures were lower in 2023-24.

The biggest category was loans (33% of the total amount involved), followed by deposits (about 10%). In terms of number of cases, card and internet fraud accounted for two-thirds.However, data on fraud reporting needs to be interpreted carefully because banks can classify a case as fraud and subsequently change that classification. This has happened to a considerable extent in recent years, mainly because of a 2023 Supreme Court judgement on an earlier RBI order on how to classify cases as fraud.

As a result, banks were forced to re-examine cases. Thus, for instance, the total value of reported frauds tripled in 2024-25 over the previous year, when measured by the reporting date rather than when the crimes actually occurred. A large chunk of the increase related to cases that had occurred in previous years.At the sector level, frauds do not pose a threat to the banking system.