The Parliamentary Standing Committee on Finance has put forth a strong case for the establishment of a centralized authority called the Cyber Protection Authority (CPA) to ensure robust cybersecurity, particularly in the financial services ecosystem. The committee emphasizes the urgent need to combat the proliferation of cybercrimes and tackle the challenges posed by generative artificial intelligence (AI), chatbots, and quantum computing.

Currently, the regulatory landscape for cybersecurity involves multiple agencies and bodies, each with distinct roles and responsibilities, but there is no central authority solely dedicated to cybersecurity. In light of this, the committee recommends the formation of a centralized overarching regulatory authority, responsible for safeguarding India's IT infrastructure and networks from cyber threats.

The report titled 'Cyber Security and Rising Incidence of Cyber/White Collar Crimes' was presented in Lok Sabha on Thursday. The committee expresses deep concern about the rising number of cybercrimes leading to financial frauds. It highlights that the volume of reported financial crimes increased from 2.62 lakh in 2020-2021 to 6.94 lakh in 2022.

During discussions, the Department of Revenue identified four major trends in cybercrimes, including the use of cryptocurrency for money laundering and terror financing, the employment of mule accounts with false addresses, the exploitation of international online betting sites for money laundering, and the misuse of lending apps and investment platforms.

According to the committee report, "The number of frauds reported at ATMs and other locations was approximately 10.80 lakh with a value of Rs 1,119 crore in 2021. However, these figures rose significantly to 17.60 lakh frauds involving Rs 2,113 crore in 2022."

Fraudulent transactions were also brought to attention based on data shared by the Reserve Bank of India. The committee states, "We observe around 38 crore transactions taking place daily in our payment system, and UPI accounts for nearly 76 percent of these transactions. While there is one fraud for every 60,000 transactions on average, the rate increases to one fraud for every 1.15 lakh UPI transactions."

The report delves into the issue of Digital Lending App (DLA) frauds, which have gained attention due to their deceptive nature and fraudulent activities. The Ministry of Home Affairs provided post-evidence replies, stating that there were 26,844 DLA frauds in 2022 and 9,926 in 2023. The committee suggests that banks and financial institutions must strengthen their KYC mechanisms and implement fraud prevention measures to address this concern.

In its efforts to curb DLA frauds, the committee recommends the Cyber Protection Authority (CPA) to establish a whitelisting framework for DLAs and other financial intermediaries. This framework would evaluate DLAs to ensure compliance with regulations and eliminate fraudulent DLAs from the market, especially those offering loans and microcredits to low-income groups at exorbitant interest rates and resorting to predatory recovery practices.

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