Indian Overseas Bank recorded a 95 per cent decline in fraud cases during the year, while UCO Bank saw a 211 per cent rise | Photo Credit: celiaosk

The amount siphoned off from public sector banks (PSBs) through fraud rose 58 per cent in a year to March 2026 to ₹35,671 crore. This even as the number of reported cases fell sharply by 79 per cent to 5,786, according to a businessline analysis of a response to an unstarred question in Rajya Sabha.

Banks had reported 27,356 fraud cases in FY25, involving ₹22,582 crore.

“Fraud cases fell, but quantum increased owing to sophisticated ways these frauds were committed,” said Ramkumar Subramanian, Partner, Grant Thornton Bharat. Newer techniques include digital arrests, which target vulnerable groups, including senior citizens. “The idea is to target a specific group and maximise the amount that can be siphoned from them.”

Awareness efforts

Among individual PSBs, the Indian Overseas Bank recorded a 95 per cent decline in fraud cases during the year, followed by the Central Bank of India and the Indian Bank, both of which reported a 91 per cent decline.

However, the trend was not uniform. For instance, UCO Bank saw a 211 per cent rise in fraud cases, while Bank of Maharashtra recorded a 36 per cent increase. Union Bank of India saw a marginal 3 per cent jump.

Banks’ efforts to create awareness through IVR campaigns and digital channels such as WhatsApp have helped, said Subramanian..

Improving recoveries

Recoveries from fraud-related cases, meanwhile, more than doubled to ₹2,514 crore in FY26 from the year ago. Punjab & Sind Bank recovered ₹772 crore during the year, compared with just ₹0.5 crore it did in FY25. Punjab National Bank’s recoveries grew nearly six-fold to ₹604 crore, while Bank of India’s rose over 71x to ₹429 crore.

However, the overall recovery of ₹2,514 crore remained a fraction of the ₹35,671 crore involved in frauds during the year.

“The gap is because mule accounts are used to hide the proceeds of money, creating a complex layer of transactions which makes illegitimate funds look legitimate,” said Subramanian.

That said, Madan Sabnavis, Chief Economist at Bank of Baroda, cautioned against reading too much into the divergence, saying it could simply reflect a smaller number of high-value cases.

Fraud prevention

Staff accountability, the government said, had been fixed in 5,147 cases over the last three financial years, while FIRs were filed in 9,451 cases against borrowers responsible for fraud. The government and the RBI have also strengthened prevention mechanisms through early-warning systems, AI-based tools such as MuleHunter, and monitoring of mule accounts.

Published on August 13, 2026