India’s Bank Fraud Problem: More Than Just “Keep the Change”

To grasp the sheer magnitude, just glance at the headlines of the last few years:

• ABG Shipyard – ₹22,842 crore
• DHFL (Yes Bank fraud) – ₹34,000 crore
• Religare Finvest / Singh Brothers – ₹2,400 crore
• IL&FS entity defaults – ₹5,000+ crore
• Nirav Modi / Gitanjali Gems – ~₹13,000 crore
• Sterling Biotech / Sandesara Group – over ₹15,000 crore

Add them up and you’re looking at ₹1.3 lakh crore in public money gone missing or unrecovered. That’s more than the combined budgets of India’s immunisation programme, midday meals, and the Pradhan Mantri Gram Sadak Yojana.

These aren’t slip-ups. They’re systemic breakdowns—full-blown operations built on forged books, layered shell firms, complicit insiders, and paper trails that stretch from Udaipur to the UAE. And yet, even as these scandals enter their tenth year, many remain unresolved, unrecovered, or only half-understood.

So let’s ask plainly: Do we know where the pipe is leaking? Not you and I—does the RBI? Can the system even see the frauds coming, let alone stop them? Is there urgency? Expertise? A forensic playbook? Or are we still depending on whistleblowers, delays, and luck?

Let’s break it down.

1. How proactive is India at spotting fraud?

Not very.

RBI’s own data shows that while the number of frauds fell 34% in FY25, the value of frauds tripled to ₹36,014 crore—because older mega-frauds came up for post-judgment review after the Supreme Court’s March 2023 ruling, which insisted that borrowers must be heard before being declared “fraudulent.”

Translation: we’re still detecting crimes after the damage is done. The average time banks take to identify a large fraud? 23 months. That’s nearly two years of quietly draining money before the system even flags concern.

2. Is the data enough to chase money in real time?

India has a Central Fraud Registry for recording scams above ₹1 lakh, accessible by scheduled commercial banks. But it’s not universally integrated into loan processing systems, nor does it extend to cooperative banks, NBFCs or fintech platforms that now touch crores of customers. Even when a borrower is flagged, there’s no unified cross-check against GST, ROC, customs, or telecom data to track shell companies, identity duplications, or import-export abuse.

In short, the information exists—but it lives in silos.

3. Do we have an investigative agency with modern tools?

Technically yes—CBI, SFIO, ED—but functionally no. These agencies have limited bandwidth and few full-time forensic data teams. Investigations hop between offices and jurisdictions. India’s promised National Financial Crime Centre, first mentioned in 2022, remains on a whiteboard. Meanwhile, the fraudsters evolve faster—with UPI masking layers, crypto conversion, cross-border remittance tricks, and a sophisticated use of mules and proxies.

Compare this with Singapore’s Anti-Scam Command Centre, where police, banks, telcos, and payment networks work shoulder-to-shoulder, freezing suspicious transfers in minutes. The difference is not just funding. It’s fusion.

4. Are courts and police equipped to deliver justice?

Most states have Economic Offences Wings (EOWs), but they are overwhelmed—handling ponzi schemes, chit fund rackets, cyber frauds and cheque bounces all at once. Forensic accounting is still seen as specialist testimony, not a default tool. Court delays are the norm. Chargesheets are often generic. Conviction rates in bank frauds are stuck below 30%.

It’s not just a delay—it’s a credibility crisis. If the road to recovery is longer than the road to Dubai, fraud becomes a rational gamble.

5. How is RBI faring?

To be fair, RBI has tightened early-warning systems: Red Flagged Accounts (RFAs), prompt reporting norms, and Lookout Circulars. It has fined banks for delay. And on the retail side, frauds in card and internet banking have actually halved in value in FY25, thanks to layered authentication.

But RBI remains an after-the-fact referee. It publishes data, audits lapses, and nudges banks—but it doesn’t run prosecutions, doesn’t coordinate inter-ministry recovery plans, and cannot override court-mandated delays post the Supreme Court’s fairness doctrine.

Grade: B– for prevention, C for recovery.

6. What Singapore does—and we don’t

Singapore’s banks lost S$15 million (~₹90 crore) to scams last year—just 0.003% of their banking assets. India’s loss? ₹36,000 crore, or about 0.14% of assets. That’s a 47x difference.

Why? Because Singapore has built a Shared Responsibility Framework: banks, telecoms, and customers all share liability. If the telco failed to block a phishing SMS, or the bank failed to detect a behaviour anomaly, the victim is compensated and the institution fined. The Monetary Authority of Singapore (MAS) fined nine entities S$27 million just last week for AML failures.

India’s guidelines are polite advisories in comparison. No compensation guarantees, no real-time obligations, and few penalties.

So What Needs to Happen?

1. Upgrade the Central Fraud Registry to become a universal pre-loan check across banks, NBFCs, fintechs and even telcos.
2. Set up a National Financial Fraud Command—not a taskforce, but a permanent agency with data analysts, AI tools, and power to act.
3. Mandate shared liability across banks and service providers. If you operate the system, you share the responsibility.
4. Create financial-crime benches in High Courts with fast-track capacity and forensic experts embedded in the system.
5. Rank banks quarterly on detection speed, loss recovery, and fraud response. Name-and-shame works when fines don’t.

Because Fraud Isn’t Just a Crime. It’s a Leak from the Public Purse.

The Supreme Court is right to demand fairness before labelling someone a fraud. But in the process, we must also ask: is fairness for the accused coming at the cost of justice for the rest of us?

The ₹1.3 lakh crore lost isn’t just a statistic—it’s what could’ve built roads, funded food security, or equipped our healthcare. When fraud becomes a “manageable cost of doing business,” the message to society is corrosive.

Until India moves from case-by-case firefighting to systemic prevention, we’ll keep watching billions slip through the cracks—and wondering, after each one, how we missed the signs again.

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