The rising tide of digital frauds have emerged as a major concern in India, with recent data from the ministry of finance revealing that scams drained Rs 4,245 crore in the first 10 months of 2024–25. The country witnessed over 2.4 million digital financial fraud incidents during this period—a sharp 67% jump from Rs 2,537 crore reported in 2022–23. These figures reveal the growing vulnerabilities in India’s digital payment ecosystem, spurred by the rapid adoption of UPI, internet banking, and mobile payments, combined with low financial literacy and the proliferation of fraudulent apps.
Digital frauds encompass a wide range of criminal activities, including debit/credit card misuse, internet banking scams, ransomware attacks, and the use of money mule accounts—bank accounts operated by third parties to launder stolen funds.
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Digital frauds on the rise
A team of international researchers recently released a World Cybercrime Index, ranking India 10th globally, highlighting its emerging role as a hub that “somewhat specialises in scams.” The rise in digital fraud is largely attributed to wide gaps in digital literacy, leaving millions of newly connected citizens ill-equipped to detect scams or protect their personal data.
Scammers take advantage of this lack of awareness through phishing emails, fake arrest calls, and bogus investment schemes. According to the Indian Cyber Crime Coordination Centre (I4C), an average of 7,000 cybercrime complaints were registered daily in the first four months of 2024—emphasising the scale of the challenge.
Economic hardship and under-resourced law enforcement have also contributed to the surge. High unemployment, especially among young, tech-savvy individuals, has driven some to engage in cybercrime as a source of income. Vulnerable groups, such as women—who are less likely to own digital devices or feel confident online—are disproportionately targeted. Meanwhile, law enforcement often lacks the resources and skilled personnel needed to combat sophisticated fraud networks, many of which operate through proxy accounts and fake identities.
Catching up with the threat
In response to the escalating threat, Indian regulators have taken several steps to strengthen the financial system’s resilience.
The Reserve Bank of India (RBI) has introduced the Central Payments Fraud Information Registry (CPFIR), a web-based platform that allows banks and payment operators to report frauds in near real-time. This facilitates better data sharing and proactive monitoring. As part of its Utkarsh 2.0 strategy, RBI recently extended this registry to include cooperative and local area banks.
Additionally, the Reserve Bank Innovation Hub has developed MuleHunter.AI, an AI-powered tool that uses machine learning to identify money mule accounts. Unlike rule-based systems, MuleHunter.AI adapts to new fraud patterns and has shown promising results during pilots with public sector banks.
The exponential rise in digital payments has heightened the need for security. Unified Payments Interface (UPI) transactions alone have grown from ₹1 trillion ($11.2 billion) in FY 2017–18 to over ₹200 trillion ($2.4 trillion) in FY 2023–24. To address this, the National Payments Corporation of India (NPCI) has implemented tighter UPI safeguards—such as device binding, two-factor authentication, daily transaction limits, and restrictions on high-risk use cases.
Further, the Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS), part of the I4C initiative, enables citizens to report scams immediately. It has helped prevent the loss of ₹4,386 crore from 1.3 million complaints. RBI also issued Master Directions on Digital Payment Security Controls in 2021, mandating robust governance and security standards for regulated entities across mobile, internet, and card-based payment systems.
Learning from global practices
India can draw valuable lessons from advanced economies in its fight against digital fraud.
In the United States, AI and machine learning are widely used to detect anomalies in large transaction datasets. Multi-factor authentication is standard practice for securing online transactions.
China has intensified its crackdown on telecom fraud, with scam cases rising 26.7% in 2024. The country has forged cross-border security collaborations with Thailand, Myanmar, and Laos to dismantle scam centres, especially along the Thai-Myanmar border. It also continues to target scam hubs near its southwestern Yunnan province, aiming to deepen cybersecurity cooperation under the Belt and Road Initiative (BRI).
The United Kingdom, meanwhile, has launched the Online Fraud Charter, fostering cooperation between government agencies, tech firms, and law enforcement. Public awareness initiatives such as “Stop, Think Fraud!” aim to educate consumers and streamline reporting mechanisms. These strategies offer a useful template for India to enhance identity verification and fraud response systems.
Advanced economies also use biometric authentication and real-time verification to prevent impersonation fraud—something India could emulate by enhancing Aadhaar-linked verification and other identity protection tools.
The pace of digital adoption in India has far outstripped public awareness around cybersecurity, creating fertile ground for scammers. The onus now lies on policymakers, regulators, and financial institutions to double down on prevention and awareness.