Banking Fraud – Prevention and Management

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Banking Fraud is posing threat to Indian Economy. Its vibrant impact will be understood be the fact that in the 12 months 2004 number of Cyber Crime had been 347 in India which rose to 481 in 2005 showing a rise of 38.5% while I.P.C. category crime stood at 302 in 2005 including 186 cases of cyber fraud and sixty eight cases cyber forgery. Thus it becomes essential that incidence of such frauds needs to be minimized. More upsetting is the truth that such frauds are getting into in Banking Sector as well.

In the current day, Global Scenario Banking System has acquired new dimensions. Banking did spread in India. Immediately, the banking system has entered into competitive markets in areas covering resource mobilization, human useful resource development, customer companies and credit administration as well.

Indian’s banking system has a number of outstanding achievements to its credit, essentially the most striking of which is its reach. In truth, Indian banks are actually spread out into the remotest areas of our country. Indian banking, which was operating in a highly comfortable and guarded environment till the start of Nineteen Nineties, has been pushed into the uneven waters of intense competition.

A sound banking system ought to possess three basic characteristics to guard depositor’s interest and public faith. Theses are (i) a fraud free tradition, (ii) a time tested Best Observe Code, and (iii) an in house immediate 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 aim of lending or funding, deposits of money from the purpose of lending or investment, deposits of money from the general 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 underneath strict obligation to pay the depositor. The bank due to this fact has to ensure at all times that the cash of the depositors just isn’t drawn fraudulently. Time has come when the security elements of the banks need to be dealt with on precedence basis.

The banking system in our country has been taking care of all segments of our socio-financial set up. The Article contains a discussion on the rise of banking frauds and numerous strategies that can be utilized to keep away from such frauds. A bank fraud is a deliberate act of omission or commission by any individual carried out in the midst of banking transactions or within the books of accounts, resulting in wrongful achieve to any individual for a brief interval or in any other case, with or with none monetary loss to the bank. The related provisions of Indian Penal Code, Legal Procedure Code, Indian Contract Act, and Negotiable Instruments Act relating to banking frauds has been cited within the current 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 contemporary society. It plays a pivotal function in economic development of a country and kinds the core of the money market in an advanced country.

Banking trade in India has traversed an extended method to assume its current stature. It has undergone a major structural transformation after the nationalization of 14 major 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 in the world.

RESERVE BANK OF INDIA-ECONOMIC AND SOCIAL OBJECTIVE

The Reserve Bank of India has an essential position to play within the upkeep of the exchange worth of the rupee in view of the shut interdependence of worldwide trade and nationwide financial growth and well being. This facet is of the broader responsibly of the central bank for the maintenance of financial and financial stability. For this the bank is entrusted with the custody and the administration of country’s worldwide reserves; it acts also as the agent of the government in respect of India’s membership of the worldwide monetary fund. With financial development the bank additionally performs quite a lot of developmental and promotional functions which up to now have been registered being outside the normal purview of central banking. It additionally acts an necessary regulator.

BANK FRAUDS: CONCEPT AND DIMENSIONS

Banks are the engines that drive the operations within the monetary sector, which is vital 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 way of three stages. They’ve moved from the character based lending to ideology primarily based lending to at this time competitiveness based mostly lending within the context of India’s economic liberalization insurance policies and the process of linking with the global economy.

While the operations of the bank have turn out to be increasingly significant banking frauds in banks are additionally increasing and fraudsters have gotten more and more sophisticated and ingenious. In a bid to keep tempo with the changing occasions, the banking sector has diversified it enterprise manifold. And the old philosophy of sophistication banking has been replaced by mass banking. The problem in management of social duty with financial viability has increased.

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