Banking Fraud – Prevention and Management

Banking Fraud is posing menace to Indian Economy. Its vibrant effect could be understood be the truth that within the yr 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 together with 186 cases of cyber fraud and 68 cases cyber forgery. Thus it turns into crucial that occurrence of such frauds should be minimized. More upsetting is the truth that such frauds are coming into in Banking Sector as well.

Within the current day, Global State of affairs Banking System has acquired new dimensions. Banking did spread in India. At the moment, the banking system has entered into aggressive markets in areas covering useful resource mobilization, human useful resource development, customer companies and credit management as well.

Indian’s banking system has several outstanding achievements to its credit, probably the most putting of which is its reach. The truth is, Indian banks are now spread out into the remotest areas of our country. Indian banking, which was operating in a highly consolationable and protected environment until the start of Nineties, has been pushed into the choppy waters of intense competition.

A sound banking system should possess three basic traits to protect depositor’s interest and public faith. Theses are (i) a fraud free culture, (ii) a time tested Best Follow Code, and (iii) an in house speedy grievance remedial system. All these situations are their missing or extraordinarily weak in India. Section 5(b) of the Banking Regulation Act, 1949 defines banking… “Banking is the accepting for the aim of lending or investment, deposits of money from the aim of lending or funding, deposits of cash from the public, repayable on demand or in any other case and withdraw able by cheque, draft, order or otherwise.” But when his cash has fraudulently been drawn from the bank the latter is underneath strict obligation to pay the depositor. The bank therefore has to make sure always that the money of the depositors is just not drawn fraudulently. Time has come when the safety elements of the banks must be dealt with on priority 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 varied strategies that can be used to keep away from such frauds. A bank fraud is a deliberate act of omission or commission by any person carried out in the course of banking transactions or in the books of accounts, resulting in wrongful gain to any individual for a short lived interval or otherwise, with or without any monetary loss to the bank. The related provisions of Indian Penal Code, Felony Procedure Code, Indian Contract Act, and Negotiable Instruments Act regarding banking frauds has been cited within the present Article.

EVOLUTION OF BANKING SYSTEM IN INDIA

Banking system occupies an vital 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 varieties the core of the money market in an advanced country.

Banking business in India has traversed an extended strategy to assume its present stature. It has undergone a significant structural transformation after the nationalization of 14 major commercial 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 maintenance of the alternate worth of the rupee in view of the close interdependence of international trade and national financial progress and well being. This aspect is of the broader responsibly of the central bank for the maintenance of economic and monetary stability. For this the bank is entrusted with the custody and the administration of country’s worldwide reserves; it acts additionally because the agent of the government in respect of India’s membership of the worldwide monetary fund. With financial development the bank also performs a wide range of developmental and promotional features which previously were registered being outside the normal purview of central banking. It also 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, additionally they have emerged as engines for social change. After Independence, the banks have passed by means of three stages. They have moved from the character based mostly lending to ideology primarily based lending to right this moment competitiveness primarily based lending in the context of India’s financial liberalization insurance policies and the process of linking with the worldwide economy.

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

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