The most common financial frauds in India 2023

Financial frauds can have devastating consequences for individuals and the economy as a whole. While digital payments have made life convenient and easy In India, they have also made us prone to all kinds of financial frauds.


A survey conducted by LocalCircles highlighted alarming statistics on financial fraud in India. Out of the respondents, 42% reported experiencing financial fraud within the past 3 years, with a concerning 74% unable to recover their lost funds.


The survey, conducted in October 2021, further revealed risky behavior among individuals.


Shockingly, 29% admitted to sharing their ATM or debit card pin details with close family members, while 4% disclosed such information to domestic and office staff.


Additionally, 33% admitted to storing sensitive financial data, including bank account details, card information, and passwords, on their email or computer, while 11% stored them in their mobile phone contact list.


According to the RBI, frauds amounting to ₹60,414 crore were reported in 2021-22 and that these frauds have cost India a staggering ₹100 crore daily over the past 7 years.


The central bank classifies these financial frauds into various categories, including misappropriation, criminal breach of trust, forged instrument encashment, manipulation of accounts, fictitious accounts, unauthorized credit facilities, negligence, cash shortages, cheating, forgery, irregularities in foreign exchange transactions, and other forms of fraud not specifically mentioned.


In this blog, we will explore the most common financial frauds in India and provide insights on how you can protect yourself from falling victim to these schemes.


1. Ponzi Schemes: A Mirage of False Promises


Ponzi schemes lure investors with promises of unusually high returns in a short period. The fraudsters use funds from new investors to pay off earlier investors, creating a false illusion of profitability.


One infamous example is the Saradha chit fund scam, where millions of investors lost their hard-earned money. The group, consisting of over 200 private companies, falsely portrayed its collective investment schemes as chit funds.


With an estimated collection of ₹200 to 300 billion (US$4–6 billion), the scheme managed to attract deposits from more than 1.7 million individuals before its eventual downfall.


Another recent example of this is the Sanjivani Credit Cooperative Society in Rajasthan that defrauded as many as 1,46,991 people of over Rs 900 crore by forging account sheets.


2. Investment Scams: Beware of Unrealistic Returns


Investment scams often entice individuals with fraudulent opportunities that promise quick and guaranteed returns. These schemes exploit people’s desire for high returns and often involve fictitious companies or fake investment products.


One such scam was the SpeakAsia Online scam, which duped investors by promising them lucrative returns for completing online surveys.


Only invest your money with SEBI approved investment platforms like Kuvera. 


3. Digital Banking and Credit Card Fraud


As digital transactions gain popularity, online banking and credit card fraud have become common. Phishing attacks, identity theft, and fraudulent transactions using stolen card details are prevalent.


An example is the 2016 debit card data breach, where millions of debit cardholders’ data was compromised, leading to unauthorized transactions and financial losses.


Learn more about the various types of credit card frauds in India and how can you protect yourself against it.



4.  Money Laundering 


Money laundering involves disguising the origins of illegally obtained funds, making them appear legitimate. Fraudsters employ complex transactions and multiple accounts to conceal the illegal source of money. In this process many financially vulnerable people are used. And sometimes these people get trapped.


A high-profile case is the INX Media money laundering case, where illicit funds were allegedly routed through foreign investments and shell companies.


5. Stock Market Manipulation


Stock market manipulation includes activities like price rigging, spreading false information, insider trading, and pump-and-dump schemes. Fraudsters manipulate stock prices, deceiving investors and causing significant financial losses.


The Satyam Computer Services scandal is a prime example, where the company’s promoters manipulated financial statements to inflate stock prices.


6. Bank Frauds


Bank frauds encompass various fraudulent activities, including loan frauds, cheque frauds, forged documents, and unauthorized transactions. These frauds result in substantial financial losses for banks and individuals.


One notable case is the Nirav Modi-PNB scam, where fraudulent Letters of Undertaking were issued, causing a massive loss to Punjab National Bank.


How to protect yourself against financial frauds in India? 


1. Protect your personal information: Safeguard sensitive information like bank account details, Social Security number, and passwords.


Avoid sharing them with others unless necessary. Be extra careful about anyone wanting your personal details over calls, messages or any other modes.


2. Monitor financial activities: Regularly review your bank statements, credit reports, and online accounts to detect any unauthorized transactions or suspicious activity.


3. Be cautious online: Stay vigilant against phishing emails, fake websites, and unsolicited calls or messages that ask for personal information. Avoid clicking on suspicious links or providing sensitive details without verifying the source.


4. Use strong passwords and enable two-factor authentication: Create strong and unique passwords for your financial accounts. Enable two-factor authentication whenever available to add an extra layer of security.


5. Stay informed about scams: Educate yourself about different types of scams, such as phishing, identity theft, and investment fraud. Be aware of common warning signs and techniques used by fraudsters.


6. Keep your devices secure: Install reputable antivirus and anti-malware software on your devices. Keep them updated to protect against potential security threats.


7. Exercise caution with public Wi-Fi: Avoid accessing sensitive financial information or making transactions when connected to public Wi-Fi networks, as they may not be secure.


8. Verify before sharing information: Before providing personal information or making financial transactions, ensure that you are dealing with reputable and trusted sources.


9. Be skeptical of offers that seem too good to be true: Exercise caution when encountering deals or investment opportunities that promise unusually high returns or require upfront payments.


Remember, if an investment opportunity seems too good to be true, it probably is and excessive caution is always better than excessive recklessness.


Stay vigilant, safeguard your finances, and report any suspicious activities to the appropriate authorities. Together, we can combat financial frauds in India and protect our hard-earned money.



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