cyber frauds at banks

Digital transactions have been a boon to people everywhere. They have reduced the erstwhile physical exertions involved in bank transactions to a mere tap or mouse click. However, with the increase in ease comes the increase in liabilities. One of these liabilities on the rise in recent times has been cyber frauds at banks. In the year 2017-18, in India, such instances have reportedly doubled up.

According to RBI (Reserve Bank of India), India’s banking sector lost a whopping Rs 41,167.7 crore (US$5.9 billion) in the financial year 2017-18 due to increasing banking frauds. That’s a massive 72% YoY increase. What is more surprising is, there is a four-fold increase in banking frauds since 2013-14 when Rs 10,171 crore worth banking frauds were committed by fraudsters. Let us look at the news in a little more detail.

Cyber Frauds At Banks On the Rise

The financial year 2017-18 was big in terms of the increasing cyber frauds incidents in the banking sector of India. According to the RBI, a total of 5,917 bank frauds were reported in 2017-18 and surprisingly, nearly one-third of these were cyber frauds. The number of cyber fraud cases reported by the Reserve Bank of India in 2017-18 was 2,059, which amounted to a sum total of Rs 109.6 crore (US$13.7 million). This exhibits a huge increase in their numbers from the year 2016-17, where only 1,372 cases were reported, amounting to Rs. 42.3 crore (US$6 million).

It is important to note that about 80% of all recorded banking frauds in 2017-18 were large-value frauds, involving Rs 50 crore or more. As many as 93% of all fraud cases worth over Rs 1 lakh took place in public sector banks, while private sector banks accounted for just 6%.

Whom to Blame?

This is a pretty interesting question, as because of the variety of answers that it is entitled to. Should a person be subject to such cyber frauds, he/she will be eligible to hold the bank liable depending on his/her own liability. Moreover, to clarify this further, RBI has set up guidelines based on which such cases are resolved. It was released in the 2017-18 Annual report.

It is divided into three basic categories depending on the involvement of the victimised consumer and the timing of the report. If the fault does not lie with the consumer, the customer does not bear any loss, provided that the incident is reported within three working days. However, the customer is expected to bear the full amount of loss if it occurred due to their own negligence. If the fault lies neither with the customer nor the bank, the customer is expected to report the incident within three working days. Upon further delay, their maximum liability ranges from Rs 5,000 to Rs 25,000 depending upon the type of account/instrument. However, if the customer fails to report within seven working days, the liability will be depending on the policies approved by the concerned bank. Here, the RBI will not interfere.

Counter-Measures

The Reserve Bank of India doesn’t seem to take this issue of cyber frauds lightly anymore. It plans to act on reducing the cyber fraud occurrences by setting up a tracking and compliance portal system. Moreover, This portal system will be used to address problems from all registered financial institutions, ranging from Banks and NBFC’s to Prepaid Payment Instruments and mobile banking interfaces as directed under the Internal Ombudsman Scheme of 2018. In addition to that, it is going to add a sense of security to the digital transactions, thus promoting it.

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