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8 Types of Bank Frauds Everyone Should Know

RBL Bank Apr 16, 2025

Digital payment methods have gained immense popularity in recent years. Both banks and customers have embraced the convenience of digital banking. However, this rapid growth has also led to an increase in fraudsters finding new ways to exploit loopholes and scam unsuspecting victims. To raise awareness among banking customers and curb fraudulent activities, the Reserve Bank of India (RBI) has taken several measures— the Early Warning System (EWS) framework; a dedicated Market Intelligence (MI) Unit; and a governance and response system.

Money laundering is another significant issue prevalent in the banking sector, with banks dedicatedly working towards implementing anti-money laundering (AML) policies to prevent the use of illicit funds in financial transactions.

In an effort to spread awareness, we have curated an article on the various types of frauds you must be aware of while banking digitally. While this list is not exhaustive, it sheds light on the most common types prevalent in the country.

What is Bank Fraud?

Bank fraud is a type of financial crime that involves the misuse of a financial institution or its services for personal gain or to commit other criminal activities. This type of fraud can take many forms, such as creating false accounts, using false identities, or manipulating account records. Fraudsters may also use stolen credit cards, ATM cards, or other forms of unauthorised access to a financial institution’s funds. Bank fraud is a serious offence that can lead to significant financial losses for both individuals and institutions.

Definition of Bank Fraud

1. Types of Fraud Through UPI

Unified Payment Interface (UPI) has quickly become one of the most preferred methods for cashless transactions and online payments for its quick and hassle-free access. However, it has also become a prominent means for fraudsters to lure customers into their schemes. If you use any of the popular UPI-based payment platforms, know that there are two types of UPI frauds—

  • UPI PIN Phishing, and
  • Request money fraud.

In a UPI PIN phishing scam payment links are sent by fraudsters through an SMS. These payment links which look similar to original payment gateway URLs are created to defraud users. After clicking on such links users are directed to the UPI payment app installed on their phone where upon giving permission by entering their UPI PIN the amount is debited from their bank account immediately.

In another type of UPI fraud, fraudsters share picture of QR code on social media platforms like WhatsApp, Instagram and Facebook where they ask users to scan the code, enter an amount, and enter their UPI PIN to receive free cash rewards in their bank account. Alternatively, fraudsters also use apps which allow them to send a QR code with a pre-populated amount asking users to just enter their UPI PIN. In such instances as soon as users enter their UPI PIN the amount is debited from their bank account immediately.

Wire transfer fraud is another type of fraud involving unauthorised access to bank accounts through stolen personal information, enabling criminals to initiate wire transfers to their own accounts.

2. Fraud Through Telecallers

Telecaller Fraud is increasingly becoming a threat. Fraudsters claim to be bank officials calling with a pretext that may include debit card issues, insufficient balance, or a claim of suspicious activity in the customer's account. After establishing authority and raising enough panic in the victim’s mind, they ask for sensitive bank details like full account number, ATM card number, PIN, OTP, or even online banking credentials. This phishing act allows the fraudsters an unbridled access to the customer's account, and they can make transactions on the customer's behalf. In instances like this, it is important to be vigilant, not share any sensitive details with strangers on phone, and know good banking practices to #RahoCyberSafe.

3. Fraud Through KYC

KYC Fraud is another type of phishing scam to collect personal information about the customer. By impersonating a banking official, fraudsters can claim incomplete KYC documents, threaten repercussions like blocking of an account or penalties, and request sensitive information such as PAN number, Aadhaar number, address proof copies, OTP, etc. These details can be used against the customer to access their bank account and steal money. This fraud can happen through emails or phone calls. It is important to know that no Bank or Government official will ever ask for sensitive banking information over phone calls and emails.

4. Wire Transfer Fraud Through Emails

“You have won $50,00,00,000! Click here to claim all of it!"

"My son suffers from a rare condition. Please save him with a small contribution."

"Save the farmers in Nigeria!"

Everyone has received at least one email that tries to lure the reader into clicking a link in the mail. Email Fraud is not just a problem for individuals; many businesses have also fallen victim to phishing emails. They can either send a virus to the system or take the user to a malicious site to gain access to their bank accounts. There are times when such emails lead to a landing page that is highly similar to a social media or an existing website that users are familiar with, and tricks them into entering their login details. These details are then used by the fraudsters to access the users' personal information and steal money. It is highly recommended that one does not click on unknown/unverified links, and always check the URL before submitting personal and sensitive information on any landing page.

5. Fraud Through ATMs

In ATM Frauds, customers are unwittingly robbed of their debit card number or PIN to gain access to their bank accounts. One of the most unpopular ATM scams involves thieves using counterfeit devices to gain access to the ATM cabin and using a false facade on the front of the machine's keypad. Inadvertently, the customer who is using the machine shares bank details on this device too, that can be accessed by fraudsters to steal money from the account. In another type of ATM fraud, some fraudsters use ‘cracking' software programmes to swipe data from free-standing ATMs.

6. Fraud by Cloning Your SIM

SIM Cloning Fraud is an online scamming method in which fraudsters gain control by creating a duplicate SIM. With this technique, the fraudster can access the victim's International Mobile Subscriber Identity (IMSI) and encryption key to track messages, listen to calls, and send texts using the mobile number. By gaining access to the mobile number, the fraudster can impersonate the victim to banks, use a two-factor authentication mechanism to reset passwords, hack financial accounts, and more.

7. Fraud Through Loans

There are a series of instances in which PAN cardholders have fallen victim to Loan Fraud. The fraudster calls victims and offers easy loans that involve minimal KYC by impersonating a bank official. After obtaining sufficient records to 'grant' a loan, fraudsters use them to purchase loans without the holder's knowledge or permission. While the fraudsters (obviously) do not bother to repay this loan, the unaware PAN cardholder is held responsible. This fraud directly affects the CIBIL score of the cardholder, in addition to leading to financial losses.

8. Account Takeover

Account takeover is a type of banking fraud where fraudsters gain unauthorised access to a customer’s account, often leading to significant financial losses. Here are some of the most common methods used in account takeovers:

  • Phishing Attacks

Phishing attacks are a type of social engineering attack where fraudsters send fake emails or text messages to customers, directing them to a counterfeit bank login page. When customers enter their credentials, fraudsters steal them to gain unauthorised access to the customer’s account. This type of attack is one of the most common types of banking frauds and can be highly damaging if customers are not vigilant.

  • Credential Stuffing

Credential stuffing is a type of attack where fraudsters use sophisticated bots to automatically test random credentials. Also referred to as “brute force” attacks, they leverage lists purchased on the dark web, trying different combinations until they gain access to an account. This method is particularly dangerous because it can be executed in real time, making it difficult for banks to detect and prevent.

  • Social Engineering

Social engineering encompasses a broad range of attacks that fraudsters use to obtain account information directly from users by tricking them or appealing to their emotions and fears during interactions. This can include phishing attacks, pretexting, baiting, and quid pro quo attacks. By manipulating human psychology, fraudsters can convince customers to divulge sensitive information, leading to account takeovers and other types of banking fraud.

By understanding these common types of banking frauds, customers can take proactive steps to protect their accounts and stay safe in the digital banking world.

Prevention is Always Better than Cure, and #RahoCyberSafe

To avoid being victim of a fraud, it is important to stay vigilant. While there are new scams coming up, certain rules remain unchanged. Here are a few things you can do to stop a fraudster from scamming you.

  • Do not share confidential information such as card CVV number and personal information such as Aadhaar or PAN number with anyone.
  • Remember that there is no need to enter your UPI PIN while receiving money.
  • OTPs are only for making payments. Do not enter OTPs from suspicious numbers in website links sent by telecallers.
  • In case of claims of suspicious activity in your account, visit your nearest branch to clarify the issue. Do not engage with telecallers claiming to resolve that issue through OTP or submitting personal information.
  • Always check email IDs before clicking on any email links. Phishing links can capture personal information.
  • If ATM withdrawal was unsuccessful, ensure that you exit the process completely before leaving the booth. Also, inspect the booth for hidden cameras to protect your ATM PIN.
  • If you are an avid digital banking user, your phone is the gateway to your account. Do not leave phones unattended in public places to avoid phone cloning or SIM cloning.
  • Protect your devices with strong passwords and create unique passwords for digital wallets. Always install the latest security patch in your system.

Victims in India can also contact the national cybercrime helpline (1930) or report incidents online at www.cybercrime.gov.in. Additionally, you can file a complaint with the Cyber Crime Cell through the SacharSathi Portal, which offers case tracking.

National Cybercrime Reporting Portal
sancharsaathi
Disclaimer:
Articles published on the website are merely indicative and suggestive in nature and do not amount to solicitation. The contents do not guarantee the desired returns and/or results. Reader is advised to exercise discretion and consult independent advisors for achieving desired result.

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