“Public Trust in Banks Eroding Due to Rising Frauds, High Loan Rates”: Raghav Chadha

New Delhi: Aam Aadmi Party (AAP) Rajya Sabha MP Raghav Chadha on Wednesday voiced concerns over rising banking frauds, high loan interest rates, and poor financial security for depositors, claiming that public trust in India’s banking system is eroding.

During a discussion on the Banking Laws (Amendment) Bill, 2024, Chadha criticised the legislation as a procedural reform that does not address citizens’ key financial concerns. The bill, which allows account holders to have up to four nominees, was passed by Parliament with Rajya Sabha’s approval through a voice vote.

Highlighting financial challenges, Chadha stated that home loan interest rates have climbed to 8.5-9%, while education loans range from 8.5% to 13%, making housing and higher education unaffordable for many. He urged the government to cap interest rates and provide subsidised loans for first-time homebuyers.

Raising alarm over fraud cases, he claimed that over 36,000 incidents were reported in 2024, with digital payment scams and loan fraud among the most prevalent. Public sector banks (PSBs) reported the highest number of frauds, leading to declining confidence in the banking system. Cyber fraud losses amounted to ₹2,054.6 crore, with UPI-related fraud witnessing an 85% surge, he added.

Chadha proposed that banks allocate at least 10% of their IT budgets to cybersecurity and implement biometric authentication for high-value transactions. He also flagged concerns over fraudulent activities linked to Know Your Customer (KYC) updates, citing reports that 70% of banking frauds occur post-KYC verification.

Criticising banking service disruptions, he pointed out that over 3,000 bank branches were shut in rural areas in 2022-23, forcing villagers to travel long distances for basic services. He also alleged that Indian consumers pay nearly ₹7,500 crore annually in hidden banking charges, including ATM fees and account maintenance costs, urging the RBI to regulate these expenses.

Chadha warned that without major reforms, public confidence in the banking system would continue to decline, affecting millions of citizens who rely on banks for savings and financial security.