Managing thrift under threat in the digital age" has been published today

Shri. Bruhaspati Samal's article "Managing thrift under threat in the digital age" has been published today (31.10.2024) in #TheKalingChronicle.

Thanks to the Editor and his team members.

"Managing thrift under threat in the digital age"


Thrift, the ancient virtue of careful financial management, has been a cornerstone of Indian culture for generations. Whether through savings in gold, land, or simple bank accounts, the ability to set aside resources for the future has been considered a marker of prudence and wisdom. The famous adage, "cut your coat according to your cloth," embodies this philosophy of living within one's means and saving for the future. However, in recent years, this virtue has come under attack. With the advent of digital finance and an increasingly complex financial landscape, the simple act of saving money has become fraught with risk. World Thrift Day, observed on October 31st is an occasion to remind ourselves of the importance of saving, but it also calls for awareness of the growing threats to our financial security. Let’s explore the history of thrift, the evolving attitudes towards savings, the rising dangers of fraud and theft, and the steps individuals, institutions, and governments can take to safeguard their money.


India's tradition of thrift dates back to ancient times. Texts such as the Arthashastra, written by the economist and philosopher Chanakya, emphasized the importance of wealth management, saving, and investment for the stability of both individuals and the state. In a largely agrarian economy, where livelihood was uncertain and dependent on the vagaries of nature, savings were not just about financial prudence but survival. Families saved grain, gold, or other tangible assets to secure themselves against famine, natural disasters, or societal upheavals. In the pre-modern era, wealth was often stored in physical assets such as land or gold. Indian households, even today, retain a significant portion of their wealth in gold, an asset that has been considered a safe and stable store of value for centuries. With the arrival of colonial banking systems and, later, modern financial institutions, new avenues for saving opened up—post office savings, fixed deposits, and recurring deposits became popular among the general population, as they provided a reliable way to earn interest on savings. Even in the early 20th century, savings were a matter of household discipline. Indian families would keep track of their expenditures carefully, maintaining a buffer for emergencies or future investments such as children's education or marriage.

As India transformed from an agrarian society into an industrialized and service-based economy, people’s attitudes towards saving evolved. The liberalization of the Indian economy in the 1990s further accelerated this change, giving rise to new ways of investing and saving. Stocks, mutual funds, life insurance, and real estate began to attract people who previously only relied on traditional banking systems and post office savings. The younger generation, especially millennials and Gen Z, are more inclined towards investments that promise high returns, such as the stock market, crypto-currencies, and peer-to-peer lending platforms. The arrival of financial technology (fintech) has made it easier than ever for individuals to invest money from their smart phones. However, this ease of access has also led to reduced financial discipline. Credit-driven consumption has become a norm, and savings rates have started to decline as consumerism rises. A report from the Reserve Bank of India (RBI) showed that household financial savings as a percentage of GDP had dropped from 23.6% in 2011-12 to 18.2% in 2020-21. The increase in borrowing for consumption, especially through credit cards and personal loans, reflects a shift from saving to spending in the Indian mindset. However, this increased access to financial markets has also exposed savers to new kinds of risks.


The rise of digital banking, online investment platforms, and payment wallets has made managing finances more convenient. However, this convenience comes with the risk of cybercrime. Cybercriminals use sophisticated techniques such as phishing, malware, identity theft, and social engineering to steal personal data and access financial accounts. Phishing attacks are one of the most common forms of digital fraud. In these attacks, fraudsters impersonate legitimate institutions like banks or payment services, tricking users into revealing sensitive information like their passwords, PINs, or credit card numbers. According to the Indian Computer Emergency Response Team (CERT-In), there was a 600% rise in phishing attacks between 2019 and 2023. The National Payments Corporation of India (NPCI) reported that UPI-related frauds accounted for a significant portion of these attacks, as scammers trick people into authorizing fake payment requests.


Traditional banking systems are also under attack. Fraudulent transactions, ATM card cloning, and unauthorized access to online banking accounts have become commonplace. A major example of banking fraud was the 2018 Punjab National Bank (PNB) scam, in which fraudulent Letters of Understanding (LoUs) were issued by the bank, leading to losses of Rs.13,000 crores. According to RBI data, the number of reported banking fraud cases increased significantly in 2023. With over 11,000 cases recorded, it’s clear that even well-regulated banks are vulnerable to sophisticated scams. One alarming trend is the increase in ATM and debit card cloning frauds, where criminals duplicate cards to withdraw money from unsuspecting customers’ accounts.


The stock market has always been a place for wealth generation, but it’s also rife with manipulations and fraud. Pump-and-dump schemes, insider trading, and other unethical practices have caused investors to lose vast sums of money. One of the most infamous stock market scams in India was the 1992 Harshad Mehta scam, where Mehta manipulated the stock market by exploiting the loopholes in the banking system, leading to a crash and losses worth Rs.5,000 crores. Even in recent times, cases of market manipulation abound. With the rise of unregulated investment options like crypto-currencies, investors are often lured into Ponzi schemes or rug-pull scams, where creators of digital assets disappear with investors’ funds. Between 2017 and 2022, over Rs.1,000 crores were lost by Indian investors to fraudulent crypto-currency schemes. Ponzi schemes and fraudulent investment plans have historically been a menace to savers. These schemes promise extraordinarily high returns but are unsustainable, as they rely on recruiting new investors to pay returns to earlier ones. When new investments stop coming in, the entire scheme collapses, leaving many people in financial ruin. A notable Ponzi scheme in India was the Rose Valley scam, which defrauded investors of more than Rs.17,000 crores. Similarly, many MLM companies have swindled individuals by enticing them into investing in worthless products or services with the promise of large returns.


In today's hyper-connected world, identity theft has become a major threat. Criminals gain access to personal information such as Aadhaar numbers, PAN cards, or bank details and use this data to create fake identities, open fraudulent bank accounts, or make unauthorized transactions. A growing concern is the misuse of KYC (Know Your Customer) data by fraudsters, especially in the digital payments ecosystem.
While threats to savings have increased in recent years, there are several measures individuals, financial institutions, and the government can take to mitigate these risks and protect people’s hard-earned money. One of the best ways to protect against fraud is through financial literacy. Many scams prey on individuals who lack a basic understanding of financial products or the risks associated with online transactions. Educational campaigns led by governments, banks, and educational institutions can equip people with the knowledge they need to avoid falling victim to scams. Financial literacy programs should be integrated into school and college curricula, ensuring that young people develop a strong understanding of personal finance, investment strategies, and cyber safety. Individuals must also be educated about safe online practices, such as not sharing sensitive information over email or phone and recognizing phishing attempts. The government and regulatory bodies like the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) play a crucial role in safeguarding savings. Strengthening regulatory frameworks around financial markets, banking institutions, and digital payment platforms can curb fraudulent activities. The RBI has already implemented measures such as mandatory two-factor authentication for online transactions, which has helped reduce instances of unauthorized access to accounts. SEBI also has strict rules regarding insider trading and market manipulations, but these need to be rigorously enforced to prevent exploitation by unscrupulous traders.


For individuals, using secure financial practices is essential to avoid becoming victims of cybercrime. Some basic but important steps include: (1) Using strong, unique passwords for each financial account, (2) Enabling two-factor authentication (2FA) wherever possible, (3) Avoiding public Wi-Fi when conducting financial transactions and (4) Regularly monitoring bank and investment accounts for suspicious activity. One of the principles of good financial management is diversification. Rather than placing all your savings in one type of investment or financial product, it's safer to spread your money across different asset classes. For example, low-risk options like fixed deposits and government-backed schemes (e.g., PPF, NSC) can be combined with moderate-risk investments like mutual funds and equities. Diversification reduces the risk of losing all your savings if one particular investment vehicle fails or is subject to fraud.

Law enforcement agencies, particularly cybercrime units, need to be equipped with the tools and knowledge to tackle financial fraud. The establishment of more cyber police stations in India is a positive step, but more investment is needed in training officers to deal with the complexities of digital crimes. Public awareness campaigns led by the police and cybercrime units can also help people recognize fraudulent schemes before falling prey to them. Financial institutions, from banks to fintech start-ups, must take greater responsibility in ensuring the safety of their customers' money. They should regularly audit their systems for vulnerabilities, implement stronger cyber security measures, and be transparent about any breaches. Additionally, banks should educate their customers about safe banking practices, including how to spot potential fraud and report suspicious activity. The introduction of artificial intelligence (AI) and machine learning (ML) tools can help banks and financial institutions detect fraudulent transactions in real-time. By analyzing patterns of behaviour, these technologies can flag transactions that deviate from the norm, alerting customers and preventing theft before it occurs.

Thrift, once a straightforward and time-honoured practice, is now more complex and challenging than ever before. While modern financial tools offer convenience and the potential for higher returns, they also expose savers to new kinds of risks. As we celebrate World Thrift Day, it's essential to acknowledge both the benefits and dangers of modern financial systems. By being aware of the threats to our savings and taking proactive steps to protect them—through financial literacy, secure practices, diversification, and institutional vigilance—we can carry forward the value of thrift into the digital age. Financial security is not just the responsibility of individuals but a collective effort involving governments, financial institutions, law enforcement, and technological advancements. Only by working together can we safeguard our wealth and ensure a secure financial future for all.

******