Online Banking Fraud and Security in the Context of an Elderly Couple’s Case with SBI
In recent times, the Indian banking sector has witnessed a significant increase in cyber frauds, with high-profile cases drawing attention to vulnerabilities in online banking systems and internal security protocols.
An Elderly Couple’s Fraud Case from Telangana
In a major breach, Rs. 63 lakh was stolen from the bank account of an elderly couple from Telangana. The incident raised serious questions about the State Bank of India’s (SBI) security measures, leading to the Reserve Bank of India (RBI) imposing a Rs. 97 lakh fine on SBI for failing to safeguard customer data and prevent unauthorized withdrawals. The incident underscores the critical need for banks to strengthen their security protocols.
The elderly couple had opened a joint account and created fixed deposits totalling Rs. 40 lakh. They had no prior engagement with online banking services and did not own a smartphone. The bank’s current system allowed activation of internet banking without adequate identity verification.
As a compensation and corrective action the couple is refunded Rs. 97 Lakhs by SBI. SBI also updated its online banking security measures to prevent future incidents of similar nature.
What measures are taken to prevent such cases in future?
To enhance security for online banking, several critical measures have been introduced.
⦁ First, mandatory Two-Factor Authentication (2FA) is now required for online transactions, particularly for high-value accounts like Fixed Deposits, to provide an added layer of protection.
⦁ Alongside this, there is a strong focus on customer education, with regular campaigns aimed at informing elderly and vulnerable customers about safe banking practices, such as the importance of not sharing credentials.
⦁ To further safeguard account holders, enhanced identity verification processes have been implemented, requiring either physical presence or biometric authentication to activate online banking services, ensuring that only legitimate account holders can access their accounts.
⦁ Additionally, sophisticated fraud detection algorithms have been deployed, monitoring transactions for any signs of suspicious activity, such as those originating from unknown devices or unusual locations, triggering alerts or account freezes until the transactions are verified.
⦁ Special attention is given to the protection of vulnerable customers, with dedicated fraud protection services, frequent security check-ins, and priority support available to assist elderly customers in the event of any suspicious activities. Together, these security measures aim to create a robust framework for protecting customers and their financial information.
ATM & Credit Card Frauds Surge in FY24
Data from various sources indicate that cybercrimes, including credit card scams and online banking frauds, have been on the rise across India. In FY24 alone, cyber frauds resulted in a loss of Rs. 177 crores. Common methods used by criminals include phishing, card cloning, and unauthorized use of credit cards. The financial losses and increasing cases emphasize the need for stronger security measures, better fraud detection systems, and greater customer awareness initiatives.
India witnessed a sharp increase in ATM and credit card frauds in FY24, with total financial losses amounting to Rs.177 crore, a significant jump compared to previous years. The frauds included unauthorized transactions, phishing, card cloning, and misuse of credit card details by both domestic and international merchants. The surge in fraud incidents highlights a growing challenge for financial institutions to safeguard digital and physical transactions against increasingly sophisticated criminal tactics.
Decision Points for Stakeholders
For Banks and Financial Institutions:
⦁ Enhance Fraud Detection: Implement advanced monitoring tools and algorithms that can identify suspicious transaction patterns early.
⦁ Strengthen Internal Controls: Review and tighten security protocols for both ATM operations and digital payment systems to reduce vulnerabilities.
⦁ Customer Awareness Programs: Proactively educate customers about potential fraud schemes, safe banking practices, and encourage the immediate reporting of suspicious activities.
For Regulators such as RBI
⦁ Regulatory Measures: Introduce stricter regulations around transaction monitoring and accountability, especially for cross-border transactions involving international merchants.
⦁ Mandatory Reporting: Push for better reporting mechanisms to ensure timely redressal of fraud cases and prevent recurrence.
For Consumers:
⦁ Stay Vigilant: Regularly monitor account statements and enable real-time transaction alerts to quickly detect unauthorized charges.
⦁ Two-Factor Authentication (2FA): Opt for additional layers of security such as two-factor authentication to better protect digital transactions.
