RBI Governor Malhotra Urges Banks to Collaborate Against Rising Digital Frauds
RBI Governor Sanjay Malhotra has called for enhanced collaboration among banks and financial institutions to combat digital fraud, emphasizing collective efforts in building shared analytics systems. Digital payment fraud values dropped significantly to ₹520.00 crore in FY25 from ₹1,457.00 crore in FY24, with transaction numbers falling from 29,082 to 13,516. The central bank's AI-enabled MuleHunter.ai system detects approximately 20,000 suspicious accounts monthly, while the RBI plans to shift toward more technology-driven, real-time supervision using SupTech and AI tools.
*this image is generated using AI for illustrative purposes only.
Reserve Bank of India Governor Sanjay Malhotra has emphasized the critical need for collaboration among financial institutions to address the escalating threat of digital fraud. Speaking on Friday, Malhotra called upon banks, non-bank financiers, and other RBI-regulated entities to work together in protecting customers and maintaining trust in the financial system.
Significant Decline in Digital Payment Frauds
The RBI's annual report reveals a substantial improvement in digital payment fraud statistics. The data shows a marked decrease in both the value and volume of fraudulent transactions across the banking sector.
| Parameter | FY25 | FY24 | Change |
|---|---|---|---|
| Fraud Value | ₹520.00 crore | ₹1,457.00 crore | -64.3% |
| Number of Transactions | 13,516 | 29,082 | -53.5% |
AI-Powered Fraud Detection Systems
The central bank has deployed advanced technological solutions to combat digital fraud. MuleHunter.ai, an artificial intelligence-enabled system developed by the Reserve Bank Innovation Hub, has demonstrated remarkable effectiveness in identifying suspicious accounts.
Key achievements of the fraud detection system include:
- Detection of approximately 20,000 mule accounts monthly
- Strong success rate in identifying fraudulent activities
- Early identification of accounts showing suspicious transaction patterns
Mule accounts, which act as conduits for funds not belonging to the account holder, typically remain dormant before suddenly displaying spikes in low-value, high-volume transactions. The regulator has implemented specific measures to help banks identify such accounts proactively.
Enhanced Supervisory Approach
Malhotra outlined the RBI's evolving supervisory strategy, emphasizing a shift toward more technology-driven oversight. The central bank intends to make supervision increasingly off-site rather than on-site, with near real-time monitoring replacing periodic assessments.
"Increasingly, this will also mean using SupTech (supervisory technology) and AI-enabled tools more deeply, while retaining judgment and accountability, firmly with supervisors," Malhotra stated. He added that similar technological tools could support the RBI's department of regulation in evidence-based rule-making.
Enforcement Actions and Regulatory Approach
The RBI's enforcement strategy reflects a balanced approach to regulatory compliance. In 2025, the central bank imposed smaller penalties on banks, with the median fine on lenders reaching almost half the level of the previous two years.
| Year | Number of Enforcement Actions | Penalty Trend |
|---|---|---|
| 2023 | 26 | Higher median fines |
| 2024 | 30 | Higher median fines |
| 2025 | 38 | Reduced penalty sizes |
Malhotra clarified that the regulator's approach is generally not punitive, with the intent being to course-correct by signaling concerns to involved entities and making others aware of acceptable conduct standards and regulatory expectations. The enforcement actions in 2025 included fines on public sector, private sector, and foreign banks, as well as small finance and payments banks.
Focus on Customer Protection
The governor emphasized that protecting customers' interests must become the cornerstone of a sustainable and resilient financial system. While acknowledging that digital channels have improved financial inclusion and convenience, Malhotra cautioned about potential risks in the absence of adequate safeguards.
"Our aim should be to ensure that digitalization and innovations are aligned with fair outcomes for consumers," he said, noting that protecting customers from rising digital frauds has engaged national attention. He warned that inadequate guardrails could enable opaque pricing, weak disclosures, and inappropriate recovery practices in digital financial services.
Historical Stock Returns for Bank of India
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +1.85% | -1.37% | +7.85% | +47.25% | +54.86% | +198.02% |
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