Banking Fraud Losses Jump 30% to ₹21,515 Crore in H1 FY26 as Big Loan Scams Dominate RBI Data
India’s banking system is facing a worrying trend: fewer fraud cases, but much bigger financial losses. Fresh data released by the Reserve Bank of India (RBI) shows that the total amount involved in banking frauds rose by 30% year-on-year to ₹21,515 crore during the first half of FY26 (April–September 2025), even though the number of fraud cases fell sharply.
The figures highlight a growing shift in the nature of financial crime — from thousands of small digital scams to a smaller number of high-value loan-related frauds that can seriously damage bank balance sheets and public confidence.
Big Losses, Fewer Cases: What the Latest Numbers Show
According to the RBI’s latest banking sector report, banks reported 5,092 fraud cases between April and September FY26. This is far lower than the 18,386 cases reported in the same period last year. Despite this sharp decline in volume, the money involved surged to ₹21,515 crore from ₹16,569 crore a year earlier.
The main reason behind this unusual trend is the growing weight of advances-related frauds, which involve corporate loans and large credit facilities. These cases tend to be far fewer in number but involve very large sums of money.
In the first half of FY26, frauds linked to bank loans accounted for ₹17,501 crore, up from ₹15,521 crore in the same period last year. This explains why overall losses rose even as the total number of frauds declined.
Why Past Fraud Cases Are Suddenly Inflating Today’s Numbers
The RBI said that the sharp rise in fraud amounts in FY25 and continuing into FY26 is partly due to re-examination of old cases.
Following a Supreme Court judgment in March 2023, banks were required to review and report certain legacy frauds again to ensure proper compliance. As a result, 122 large fraud cases involving ₹18,336 crore were freshly classified and disclosed during FY25.
These cases, many of which are linked to older corporate loan accounts, have had a major impact on the headline numbers, making recent fraud losses appear much larger.
Digital Frauds Still Dominate in Numbers
While loan frauds dominate in value, card and internet frauds remain the most common type of financial crime.
During FY25, based on the date of occurrence:
- 66.8% of all fraud cases were related to cards and online transactions
- However, these made up only a small portion of the total money lost
This reflects the reality of modern banking: millions of small digital transactions create opportunities for cybercrime, but most individual cases involve relatively small amounts.
Encouragingly, the RBI noted that both the number and value of card and internet frauds declined across all bank groups during FY25. This suggests that improvements in monitoring systems, real-time alerts, and customer awareness are starting to show results.
Private Banks vs Public Sector Banks
The RBI data also highlights a clear difference in how fraud is distributed across the banking system.
In FY25:
- Private sector banks accounted for 59.3% of total fraud cases
- Public sector banks (PSBs) accounted for 70.7% of the total money involved
This means private banks see more frequent frauds, largely driven by digital transactions, while public sector banks face bigger financial hits, mostly from large corporate loan frauds.
PSBs also recorded the highest share of advances-related frauds in both the number of cases and the total amount involved, reflecting their larger exposure to big-ticket lending.
Why Loan Frauds Are So Costly
Experts and regulators point to several deep-rooted problems behind large banking frauds:
- Weak credit appraisal in large and complex loan arrangements
- Poor monitoring of how borrowed funds are used
- Delayed recognition of stress in loan accounts
- Governance failures, including lack of accountability in approving or restructuring loans
Because these cases often involve corporate groups borrowing from multiple banks, problems can go unnoticed for years before being formally declared as fraud. By the time they are reported, the financial damage is already severe.
What Rising Fraud Losses Mean for the Economy
High-value banking frauds have consequences far beyond the balance sheets of individual banks:
- They force banks to set aside more money as provisions, reducing their ability to lend
- They erode public trust, especially in government-owned banks
- They can lead to taxpayer-funded recapitalisation
- They make banks more cautious, reducing credit to MSMEs and productive sectors
In short, large frauds slow down economic activity and raise the cost of doing business.
Steps Being Taken to Control Fraud
The RBI and the government have rolled out several measures to tackle both digital and loan-related frauds:
- Central Fraud Registry (CFR) to share fraud data across banks
- Early Warning Systems and Red-Flagged Accounts to spot trouble early
- Financial Fraud Risk Indicator (FRI) for real-time tracking of suspicious transactions
- Insolvency and Bankruptcy Code to improve recovery from bad loans
Banks are also being encouraged to use advanced analytics and AI tools to detect unusual patterns before losses grow.
The Road Ahead
The RBI’s latest data sends a clear message: India is making progress in controlling small digital frauds, but large loan-related scams remain a serious threat. Strengthening internal controls, improving loan monitoring, and ensuring quicker reporting will be critical if banks are to prevent future shocks.
As financial transactions become more complex and technology-driven, the fight against fraud will increasingly depend on real-time intelligence, stronger governance, and faster regulatory action. How effectively these tools are used will determine whether the next set of RBI numbers tells a more reassuring story.
