Bank fraud in India is increasingly shifting from external cybercriminals to insider threats, where trusted bank employees allegedly exploit their access to customers’ accounts, fixed deposits and banking systems to siphon off funds. While technological advancements have transformed banking into a faster and more efficient service, recent investigations suggest that the same digital infrastructure is also being manipulated by organised networks of rogue employees operating across multiple financial institutions.
Several investigations conducted across the country during the past two years have revealed a recurring pattern in which bank insiders allegedly use forged documents, unauthorised loans, fake account operations and shell transactions to divert customers’ money without their knowledge. The primary victims in many such cases have been Non-Resident Indians (NRIs), senior citizens, deceased account holders and customers who rarely visit their home branches.
A typical fraud begins when an employee with authorised access to the Core Banking System (CBS) creates a loan against a customer’s fixed deposit by using forged documentation. Since the original fixed deposit receipt remains unchanged and customers often receive no real-time alert regarding lien creation, the fraudulent activity may remain unnoticed for months or even years. Before the customer discovers the irregularity, another fraudulent loan may allegedly be created against a different depositor’s account in another branch to close the earlier loan, effectively erasing the immediate evidence while extending the financial trail across institutions.
Investigators examining such cases have found that these frauds are rarely the work of a single dishonest employee. Instead, they often involve organised syndicates comprising bank officials, financial intermediaries, chartered accountants, property dealers and other facilitators who allegedly coordinate transactions across multiple banks. The diverted funds are frequently routed into real estate investments or layered through various financial channels, making recovery difficult and delaying detection.
Official data presented in Parliament earlier this year indicated that cases involving bank employees declined from 2,624 in FY2020-21 to 1,935 in FY2024-25, with around 400 cases reported during the first half of FY2025-26. However, researchers and financial crime specialists caution that lower reported numbers do not necessarily indicate a reduction in insider fraud. Studies based on Reserve Bank of India data have suggested that nearly one-third of banking frauds involve internal actors, particularly junior and middle-level employees with access to operational banking systems.
Several high-profile investigations during 2024 and 2025 highlighted the seriousness of the problem. In Chennai, dozens of bank employees were arrested in cases involving forged signatures, unauthorised withdrawals and fraudulent transactions targeting NRI fixed deposits. In Mohali, a bank manager allegedly secured a loan against the fixed deposit of a retired teacher without authorisation. Kota witnessed the arrest of a relationship manager accused of diverting crores of rupees from more than 100 customer accounts, many belonging to senior citizens. In Ahmedabad, investigators uncovered a scheme involving the fraudulent closure of over 100 deposit and savings accounts, while in Gurugram an NRI woman allegedly lost savings accumulated over several years after forged records were used to siphon money from her account.
Financial crime experts believe that the migration to Core Banking Systems significantly improved operational efficiency but also created new opportunities for insider abuse when internal monitoring failed to evolve at the same pace. Although CBS records every transaction and identifies the employee performing it, existing systems often lack automated mechanisms that question unusual account activities or immediately notify customers whenever sensitive actions such as lien creation, premature fixed deposit closure, loan generation or cheque book issuance occur.
To strengthen fraud prevention, the Reserve Bank of India introduced revised Master Directions on Fraud Risk Management in July 2024, requiring banks to establish dedicated fraud management functions, deploy Early Warning Systems and strengthen board-level oversight. Experts, however, argue that additional safeguards are still necessary. They recommend mandatory real-time SMS and email alerts for every transaction involving fixed deposits, compulsory two-factor verification before creating liens or loans against customer deposits, and enhanced monitoring of accounts belonging to NRIs and senior citizens, who remain particularly vulnerable to insider fraud.
Financial analysts also stress that banks must prioritise criminal prosecution over quiet settlements whenever insider fraud is detected. Unless institutions strengthen internal accountability, improve audit mechanisms and deploy AI-driven behavioural monitoring systems capable of identifying suspicious employee activities, organised insider fraud will continue to pose one of the most serious threats to India’s rapidly expanding digital banking ecosystem.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
