India's Financial Fraud Risk Indicator Helps Prevent INR 660 Crore Cyber Fraud Losses in Just 6 Months Indian businesses, specifically MSMEs, can benefit from what appears to be a very effective tool against financial fraud and cybercrimes.

India's digital landscape has seen drastic changes over the years, specifically how money is being exchanged. With platforms like UPI and several other related fintech evolutions, it's become much easier for businesses and individuals alike to transact with each other. The byproduct of this revolution is increasing financial frauds and crimes.

India suffered a loss of INR 22,845.73 crore to cyber criminals in 2024, a whopping 206% surge from Rs 7,465.18 crore reported in 2023, the ministry of home affairs disclosed earlier this year. The silver lining is that the government is taking multiple measures to combat digital frauds. One of such measures has been Financial Fraud Risk Indicator (FRI). And it seems to be quite effective too.

The Department of Telecommunications (DoT) has disclosed that the FRI has helped prevent losses worth INR 660 crore cyber fraud losses in just six months of rollout in May this year.

"As reported by various Public Sector Banks, Private Sector Banks, Co-operative Banks, TPAPs and other financial institutions, a large number of suspicious transactions have been either declined or issued with alerts by leveraging the FRI available on DIP of DoT, thereby preventing potential financial losses of approximately ₹660 crore across the banking ecosystem," the DoT said in a release.

The telecom department also acknowledged the active support of various institutions such as the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI). It also added that more than 1000 banks, TPAPs, and Payment System Operators (PSOs), have onboarded the Digital Intelligence Platform (DIP).

It appears that the FRI is fast emerging as one of the most effective tools to preempt cyber safety. But how does it function and how can businesses benefit from it?

Think of the Financial Fraud Risk Indicator as a live risk thermometer for money movement. Every transaction leaves signals — who initiated it, from where, at what time, on which device, and how it compares to past behaviour. FRI continuously reads these signals, scores the risk, and flags what looks abnormal before damage is done. The power of FRI is not just detection, but timing. It intervenes early, when fraud is still a probability, not a loss. In a digital economy moving at machine speed, this shift from post-incident investigation to real-time prevention is the real breakthrough.

To further understand, the FRI maps risk scores for mobile numbers used in digital transactions. It works by aggregating signals from multiple sources, such as citizen reports from platforms like Chakshu, complaints on the National Cybercrime Reporting Portal, intelligence from banks and telecom providers, and classifying a mobile number as Medium, High, or Very High risk for financial fraud.

When a transaction involves a number flagged under FRI, banks and payment providers can take preventive action in real time, such as issuing alerts, adding friction, or blocking the transaction altogether. In simple terms, FRI helps financial institutions identify risky actors earlier and act before money is lost, rather than reacting after fraud has occurred.

Why Should Businesses Care?

The FRI framework will have a positive impact on Indian businesses, specifically small and medium enterprises. Businesses can essentially leverage the systems to ensure a 'digital hygiene' when they're transacting. May not be comprehensive, but the FRI does help with a layer of due diligence that previously remained elusive for small players. Subsequently, it creates a level-playing field with a similar kind of high-end safety net.

"In a lot of instances, risk often sits inside contracts. Distributor agreements, trade schemes, rebates, and pricing addendums are frequently signed under time pressure and stored across emails and PDFs. Fraud and leakage happen when outdated terms are executed or approvals are bypassed. An AI-powered CLM linked to FRI changes this," Krupesh Bhat, Founder & CEO, Melento (formerly SignDesk) told Entrepreneur India.

"It flags unusual contract changes, rushed signings, or deviations from approved commercial terms before payments are triggered. Platforms like Melento help FMCG and manufacturing companies bring visibility, audit trails, and intelligence into everyday contracting. For SMEs, this means fewer disputes, controlled margins, and trust at scale without adding operational complexity."

Keshava Murthy, CEO & Co-Founder, MattersAI also echoes the benefits of the FRI framework for businesses. Murthy says that the most small and mid-sized enterprises lack the resources to build sophisticated fraud-detection systems. By leveraging FRI signals through banks and payment platforms, they gain enterprise-grade protection by default. FRI also helps businesses reduce financial losses, improve customer trust, and avoid regulatory complications caused by fraudulent transactions.

"As India's digital economy grows, frameworks like FRI ensure that security is democratized, not limited only to large institutions with deep security budgets," he added.

"SMEs are increasingly targeted due to limited cybersecurity resources and growing digital exposure. An AI-powered FRI framework provides them with enterprise-grade fraud protection without requiring large security teams or complex infrastructure. Key benefits include early detection of fraudulent transactions, reduced financial losses, improved compliance with regulatory expectations, and increased trust with customers and partners. Importantly, AI-driven FRI systems can be deployed in a cost-efficient, scalable manner, making them accessible to businesses of all sizes," said Aniket Tapre, Founder & CEO of Neural Arc.

The Road Ahead: AI and Beyond

The next frontier for FRI could very well be deeper integration of Artificial Intelligence (AI). Even as the current setup relies on reporting and rules, an AI-driven FRI framework could help with predictive analytics. AI algorithms could go deeper into identifying even minor patterns and digital signatures of fraudsters.

Back in 2023, India began deploying an AI tool called ASTR (an acronym for Artificial Intelligence and Facial Recognition powered Solution for Telecom SIM Subscriber Verification) to weed out fraudulent phone numbers. In the first phase of the initiative, India scanned more than 87 crore mobile connections to remove fraudulent 36.61 lakh connections.

Recently, the telecom department and the Financial Intelligence Unit-India (FIU-IND) signed an MoU to take on financial fraud and cybercrime though various measures such as info sharing and coordination, leveraging DoT's telecom data (like ASTR for fake SIMs) and FIU-IND's financial intelligence (like the FRI tool) for real-time threat detection, protecting India's digital economy, and creating joint SOPs for preventing fraudulent mobile connections and digital scams.

Having said that, AI can significantly enhance FRI by making it faster, smarter, and more adaptive. Murthy explains AI can correlate telecom-based risk indicators with behavioral and transaction patterns, helping distinguish between genuine customers and coordinated fraud attempts more accurately. Second, AI models can learn continuously from new fraud tactics, allowing the system to detect emerging scams, such as mule networks or social-engineering attacks, before they scale.

"Finally, AI can help automate context-aware decisioning, where risk actions are tailored based on severity, user behavior, and historical patterns, reducing false positives while improving protection.In effect, AI transforms FRI from a static risk flag into a living intelligence layer that evolves with the threat landscape," Murthy added.

"Let us look at the BFSI industry, where fraud rarely happens in isolation. A risky transaction is often preceded by document manipulation, rushed approvals, or policy overrides. AI can strengthen FRI by connecting these dots across systems. For example, a loan that looks compliant on paper but shows abnormal signing patterns, device behaviour, or timing gaps should raise a higher fraud score. At Melento, AI-powered workflow and document intelligence help surface these hidden signals early. When contract execution, approvals, and transactions are viewed as one connected flow, FRI moves from detecting bad transactions to predicting bad intent. That shift is where real fraud reduction happens," Bhat explained.