Navigating the Landscape of Financial Frauds in India: A Closer Look

Navigating the Landscape of Financial Frauds in India: A Closer Look

Author: Lawvanyaa Kannan, a student at Symbiosis Law School, Hyderabad.

In 2014, a new government took the reins in India with a vision to promote financial inclusion and empower its citizens economically. This vision materialized in the form of the Pradhan Mantri Jan-Dhan Yojana (PMJDY), a transformative initiative also known as the JAM scheme – Jan Dhan Aadhar Mobile. Launched by Prime Minister Narendra Modi on August 28, 2014, PMJDY aimed to provide affordable access to essential financial services, including banking savings and deposit accounts, remittance, credit, insurance, and pensions.

Within the first week of its inauguration, a staggering 1.5 crore (15 million) bank accounts were opened, setting a record acknowledged by the Guinness World Records. This remarkable achievement earned India recognition for "The most bank accounts opened in 1 week as a part of financial inclusion campaign." As of June 1, 2016, the initiative had led to the opening of over 22 crore (220 million) bank accounts, with ₹384.11 billion (US$5.7 billion) deposited under the scheme.

The success of PMJDY has been instrumental in transforming India's financial landscape. From just 1.5 crore bank accounts at its inception, the country now boasts 50 crore bank accounts. In addition to this, digital payments, once negligible a decade ago, have soared to 10 billion transactions, a testament to India's growing digital economy.

However, with the surge in bank accounts and digital transactions, the specter of financial and digital fraud has also risen. India now holds the distinction of conducting nearly 10 billion digital transactions on a monthly basis, according to the National Payments Corporation of India (NPCI). Unfortunately, alongside this growth, the incidence of digital fraud has also increased substantially.

In the fiscal year 2023, the banking system recorded a total of 13,530 fraud cases, with nearly 49 percent (6,659 cases) falling into the digital payment category, encompassing cards and internet-based transactions. It is important to note that these are only the reported cases, as many instances go unreported due to a lack of awareness.

Digital fraud can manifest in various forms, including transactions involving UPI (Unified Payments Interface), PhonePe, Google Pay, online banking, or ATM usage. For example, one common UPI transaction fraud occurs when individuals click on seemingly innocent links, only to have their phones hacked due to vulnerabilities in those links. As a result, hackers gain access to UPI login credentials, enabling fraudulent transactions. To mitigate these risks, it is essential to exercise caution:

• Beware of Unwanted Links and Attachments: Do not open links or attachments from unknown sources, as they may contain harmful bugs.

• Secure Personal Information: Refrain from storing passwords and OTPs on your devices and delete bank-related emails regularly.

• Control App Permissions: When downloading apps, avoid granting all requested permissions, as this could compromise your security.

• Protect OTPs: Do not share OTPs or other sensitive information with anyone.

• Isolate Online Banking: When conducting online banking operations, close all other browser tabs to minimize security risks.

• Secure Your ATM Card: Never lend your ATM card to anyone and avoid sharing your PIN.

Digital banking offers unparalleled convenience, particularly for conducting transactions from the comfort of one's home. However, it also carries certain risks, making it imperative for regulatory authorities and banks to continuously educate the public about digital frauds, their methods, and how individuals can protect their hard-earned money.

Especially vulnerable to these frauds are economically disadvantaged individuals. Therefore, it is crucial that we collectively work toward raising awareness and reporting such incidents to enable the implementation of preventive measures. By doing so, we can ensure that every Indian reaps the benefits of digital financial inclusion while staying protected from potential threats.