"RBI Report: Rise in Counterfeit Currency and Digital Fraud Challenges Banking System"

According to the annual report for 2022-23 released by the Reserve Bank of India (RBI), there has been an increase in the detection of counterfeit currency notes in the banking system. The report indicates that there was a rise of 14.4 percent in counterfeit currency notes of ₹500 denomination, while those of ₹20 denomination saw an increase of 8.4 percent. Out of all the fake currency notes detected, 4.6 percent were found at the RBI, while 95.4 percent were detected at other banks.

On the other hand, counterfeit notes of ₹10 denomination decreased by 11.6 percent, ₹100 denomination notes declined by 14.7 percent, and ₹2,000 denomination notes decreased by 27.9 percent.

In terms of value, the share of ₹500 and ₹2,000 banknotes increased to 87.9 percent of the total value of notes in circulation as of March 31, compared to 87.1 percent from the previous year. In terms of volume, ₹500 banknotes had the highest share at 37.9 percent, followed by ₹10 denomination notes at 19.2 percent.

The disposal of soiled banknotes increased by 22.1 percent, with 2,293 crore pieces being disposed of during the year, compared to 1,878 crore pieces in FY22. The total expenditure incurred on printing of securities amounted to ₹4,683 crore, a decrease from ₹4,985 crore in the previous year.

Regarding system frauds, the RBI noted that although private banks reported the highest number of frauds in FY23, public sector banks contributed more to the total fraud amount. Digital payment frauds, including cards and internet transactions, were the most common in terms of the number of cases, while loan portfolios had the highest value of frauds.

Fraud reporting has increased in recent years due to educational efforts by the RBI, banks, and payment system operators on fraud reporting and alert mechanisms. Overall, the total number of frauds reported in FY23 decreased by 49 percent compared to the previous year, following a 55 percent decline in FY22.

The RBI highlighted a significant time gap between the occurrence of a fraud and its detection. As a result, a majority of the frauds reported in FY23 (95 percent) and FY22 (94 percent) were related to incidents that occurred in previous financial years.

Digital transactions through various payment methods and channels have experienced the highest number of frauds. Although internet-based transactions are growing in popularity, some online payments fail to meet security standards, posing potential risks to customers. Additionally, digital payment methods are more susceptible to fraudsters employing phishing and vishing techniques, while unmanned ATMs are prone to skimming and other malicious activities.