Parliamentary Committee flags 'trust deficit' in digital payments, says ₹5,500 crore lost between Apr-Sep 2023

Parliament’s Standing Committee expressed deep concern on the “trust deficit” in India’s digital payment system, citing a loss of ₹5,574 crore to cyber frauds in just six months between April and September of 2023.

On Friday, the Standing Committee on Communications and IT tabled its 54th report before the Parliament. The report focuses on “Digital Payments and Online Security Measures for Data Protection”.

The committee further flagged the recovery rate which is “abysmally low at” 10.4%. The committee says that the Ministry of Electronics and Information Technology (MeitY) needs to streamline the process of the return of the amounts on lien/frozen to the victims.

The Parliamentary panel has also raised the issue of misuse of virtual accounts, terming it “Very serious lacuna in the banking system”. The committee claims that virtual accounts were being used to mask the money trail and were not monitored. The report said virtual accounts could also evade Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) mechanisms.

These findings come in the wake of RBI taking action against Paytm Payments Bank for failure to comply with KYC norms, among other issues.

The committee also notes that there should be a focus on the promotion of local Indian players in the fintech universe. The panel reasons that it would be more feasible for RBI to regulate Indian fintech apps, as compared to foreign apps.

The committee also records how in 2021, 54979 cases of cyber fraud were taken up for trial, but convictions were secured in only 491, representing a conviction rate of less than 1%.

The committee has opined that there is an Imperative need for a statutory and legislative overhaul in the domain of cybercrimes. As per the panel, punitive measures under the law should act as a deterrent for criminals.

The committee has also recorded that more than 200 Android and banking malware have been identified by the government.

The committee records that the names and details of these illegal apps have been shared with Google. The Committee has asked for clarity from Google and law enforcement agencies, on action taken against the illegal apps.

The committee has recommended a multipronged approach with effective coordination of all stakeholders.

The parliamentary panel has called upon the various ministries involved, to focus on preventive measures to tackle cyber frauds.