Banking Fraud – Prevention and Management

Banking Fraud is posing menace to Indian Economy. Its vibrant impact will be understood be the fact that in the year 2004 number of Cyber Crime were 347 in India which rose to 481 in 2005 showing a rise of 38.5% while I.P.C. class crime stood at 302 in 2005 including 186 cases of cyber fraud and sixty eight cases cyber forgery. Thus it turns into very important that occurrence of such frauds must be minimized. More upsetting is the truth that such frauds are entering in Banking Sector as well.

Within the present day, Global Situation Banking System has acquired new dimensions. Banking did spread in India. Today, the banking system has entered into aggressive markets in areas covering useful resource mobilization, human resource development, customer services and credit management as well.

Indian’s banking system has several excellent achievements to its credit, the most placing of which is its reach. In truth, Indian banks at the moment are spread out into the remotest areas of our country. Indian banking, which was operating in a highly comfortable and guarded environment until the beginning of Nineties, has been pushed into the uneven waters of intense competition.

A sound banking system should possess three basic characteristics to guard depositor’s interest and public faith. Theses are (i) a fraud free tradition, (ii) a time tested Best Apply Code, and (iii) an in house quick grievance remedial system. All these circumstances are their missing or extraordinarily weak in India. Part 5(b) of the Banking Regulation Act, 1949 defines banking… “Banking is the accepting for the purpose of lending or investment, deposits of money from the purpose of lending or funding, deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.” But when his money has fraudulently been drawn from the bank the latter is beneath strict obligation to pay the depositor. The bank due to this fact has to ensure always that the cash of the depositors is not drawn fraudulently. Time has come when the security facets of the banks must be handled on precedence basis.

The banking system in our country has been taking care of all segments of our socio-economic set up. The Article contains a discussion on the rise of banking frauds and various methods that can be utilized to keep away from such frauds. A bank fraud is a deliberate act of omission or fee by any individual carried out in the middle of banking transactions or within the books of accounts, resulting in wrongful gain to any individual for a temporary period or in any other case, with or without any monetary loss to the bank. The relevant professionalvisions of Indian Penal Code, Legal Procedure Code, Indian Contract Act, and Negotiable Instruments Act relating to banking frauds has been cited in the present Article.

EVOLUTION OF BANKING SYSTEM IN INDIA

Banking system occupies an essential place in a nation’s economy. A banking establishment is indispensable in a modern society. It performs a pivotal position in economic development of a country and forms the core of the money market in an advanced country.

Banking business in India has traversed a long method to assume its present stature. It has undergone a major structural transformation after the nationalization of 14 main business banks in 1969 and 6 more on 15 April 1980. The Indian banking system is exclusive and maybe has no parallels within the banking history of any country within the world.

RESERVE BANK OF INDIA-ECONOMIC AND SOCIAL OBJECTIVE

The Reserve Bank of India has an vital role to play within the maintenance of the trade worth of the rupee in view of the shut interdependence of international trade and nationwide economic development and well being. This side is of the broader responsibly of the central bank for the maintenance of financial and monetary stability. For this the bank is entrusted with the custody and the administration of country’s international reserves; it acts also as the agent of the government in respect of India’s membership of the international monetary fund. With economic development the bank also performs a variety of developmental and promotional functions which previously had been registered being outside the traditional purview of central banking. It additionally acts an vital regulator.

BANK FRAUDS: CONCEPT AND DIMENSIONS

Banks are the engines that drive the operations in the monetary sector, which is significant for the economy. With the nationalization of banks in 1969, in addition they have emerged as engines for social change. After Independence, the banks have passed by three stages. They have moved from the character primarily based lending to ideology primarily based lending to right this moment competitiveness based lending in the context of India’s economic liberalization policies and the process of linking with the global economy.

While the operations of the bank have become increasingly significant banking frauds in banks are additionally increasing and fraudsters are becoming more and more sophisticated and ingenious. In a bid to keep tempo with the altering times, the banking sector has diversified it enterprise manifold. And the old philosophy of sophistication banking has been changed by mass banking. The challenge in management of social responsibility with financial viability has increased.

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