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Mis-selling of financial products and services by regulated entities (REs) has significant consequences for both customers and the financial sector, the central bank said in its report on Trends and Progress of Banking in India 2024-25 released on Monday.
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It said it is proposed to review the existing instructions on appointment of recovery agents and conduct-related matters relating to recovery of loans and issue harmonized instructions in this regard.
Regarding digital fraud, the report said the Reserve Bank of India (RBI) continues to work with stakeholders, including the Ministry of Home Affairs, to develop and operationalize measures to curb digital and cyber-enabled fraud and strengthen customer protection.
“RES needs to establish stronger internal controls, ensure adequate grievance redressal officers at all levels and increase digital financial literacy to combat digital frauds,” the report said.
It said recent initiatives of the Reserve Bank include the development of MuleHunter.ai to facilitate system-wide learning to identify and flag potential mule accounts implemented in 23 banks by December 17, 2025.
Another initiative of the RBI is a Digital Payment Intelligence Platform (DPIP) to leverage AI to flag risky transactions and share intelligence for fraud detection and prevention.
RBI further said that the instructions relating to limited liability of customers in unauthorized electronic banking transactions issued in 2017 are being reviewed in view of major changes in the banking landscape, including the emergence of new payment channels, higher volumes of digital transactions and evolving fraud patterns.
“This is expected to improve customer protection measures,” the report said.
The Reserve Bank further said that its regulatory and supervisory policies are focused on strengthening cyber security, reducing fraud, enhancing customer protection, integrating climate risk awareness and preserving financial stability as a key goal.
It said balancing financial innovations with stability, strengthening public trust and supporting sustainable growth will continue to guide the Reserve Bank’s policies going forward.
It also highlighted that fraud poses many challenges to financial institutions by exposing them to reputational, operational and business risks, while also undermining customer confidence.
During 2024-25, the total number of frauds declined, depending on the date of reporting by banks. However, the amount involved in the fraud increased.
“This was primarily due to re-investigation and fresh reporting of 122 fraud cases amounting to Rs 18,336 crore after ensuring compliance with the judgment of the Supreme Court of India dated March 27, 2023,” the report said.
Based on date of occurrence of fraud, during 2024-25, the share of card/internet fraud in terms of number of cases was 66.8% of the total. In terms of amount, the share of advance-related frauds was 33.1%.
In 2024-25, the share of private sector banks in the total number of frauds reported was 59.3%, while public sector banks accounted for 70.7% of the amount involved.
Among private banks, card/internet related frauds had the largest share by number, and frauds related to advances by value in 2024-25.
In contrast, state-owned banks recorded the highest share of frauds related to advances, both in terms of number of cases and amount involved.