Statsguru: India faces growing financial risks from cybersecurity breaches

Outgoing RBI governor Shaktikanta Das has listed maintaining of cybersecurity as one of six challenges for his successor Sanjay Malhotra. Given the rapid pace of digital technology adoption in India, it becomes pertinent to see the trend of cyber as well as digital financial frauds in the country.

 

The total number of cybersecurity breaches in India has zoomed from 2017 to 2023, and so has the number of those impacting government institutions (Chart 1). 

 

The number of digital financial frauds rose more than four times in FY24 year-on-year to comprise 80 per cent of all financial frauds. On similar lines, the amount involved in digital financial frauds also grew in the FY18-FY24 period (Chart 2). 

 

While private banks’ share in the total number of cyber frauds steadily increased during the FY20-24 period, the share of these lenders in total value of such frauds also increased before stabilising gradually. As for public-sector banks, even as their share in total number declined steadily, the share of these lenders in total value stabilised at over 70 per cent after initially declining (Chart 3). 

 

Mule accounts, which are used by criminals to launder illicit funds, have mushroomed in Bhubaneswar, followed by Lucknow and Navi Mumbai. Recently, the RBI developed a tool named MuleHunter.ai to identify mule accounts and fraud patterns more effectively (Chart 4). 

 

The volume and the value of domestic UPI payment frauds have increased at a compound annual growth rate of 89 per cent and 112 per cent, respectively, from FY21 to FY24 (Chart 5). 

 

With the growing adoption of digital payments and UPI in the country, there has also been a rise in QR code scams in recent years (Chart 6).