Banking Fraud – Prevention and Control

Banking Fraud is posing menace to Indian Economy. Its vibrant effect can be understood be the fact that within 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. category crime stood at 302 in 2005 together with 186 cases of cyber fraud and sixty eight cases cyber forgery. Thus it turns into very important that occurrence of such frauds should be minimized. More upsetting is the truth that such frauds are getting into in Banking Sector as well.

Within the current day, Global Scenario Banking System has acquired new dimensions. Banking did spread in India. Immediately, the banking system has entered into aggressive markets in areas covering resource mobilization, human resource development, buyer providers and credit administration as well.

Indian’s banking system has several outstanding achievements to its credit, probably the most striking of which is its reach. In fact, 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 protected surroundings until the start of Nineteen Nineties, has been pushed into the uneven waters of intense competition.

A sound banking system should possess three fundamental characteristics to guard depositor’s interest and public faith. Theses are (i) a fraud free culture, (ii) a time tested Best Apply Code, and (iii) an in house quick grievance remedial system. All these circumstances are their lacking or extremely weak in India. Section 5(b) of the Banking Regulation Act, 1949 defines banking… “Banking is the accepting for the purpose of lending or funding, deposits of cash from the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.” But when his cash has fraudulently been drawn from the bank the latter is under strict obligation to pay the depositor. The bank therefore has to ensure at all times that the money of the depositors is just not drawn fraudulently. Time has come when the safety points of the banks have to be handled on priority basis.

The banking system in our country has been taking care of all segments of our socio-economic set up. The Article incorporates a discussion on the rise of banking frauds and various strategies that can be used to avoid such frauds. A bank fraud is a deliberate act of omission or commission by any individual carried out in the middle of banking transactions or in the books of accounts, leading to wrongful acquire to any particular person for a short lived interval or otherwise, with or with none monetary loss to the bank. The related professionalvisions of Indian Penal Code, Felony 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 performs a pivotal position in financial development of a country and varieties the core of the money market in an advanced country.

Banking trade in India has traversed an extended technique to assume its present stature. It has undergone a significant structural transformation after the nationalization of 14 main commercial banks in 1969 and 6 more on 15 April 1980. The Indian banking system is unique and maybe has no parallels in the banking history of any country in the world.

RESERVE BANK OF INDIA-ECONOMIC AND SOCIAL OBJECTIVE

The Reserve Bank of India has an necessary position to play in the maintenance of the alternate worth of the rupee in view of the close interdependence of international trade and nationwide financial development and well being. This facet is of the broader responsibly of the central bank for the upkeep of economic 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 federal 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 capabilities which previously had been registered being outside the conventional purview of central banking. It also acts an essential regulator.

BANK FRAUDS: CONCEPT AND DIMENSIONS

Banks are the engines that drive the operations within the financial 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 mostly lending to ideology primarily based lending to immediately competitiveness primarily based lending in the context of India’s financial liberalization policies and the process of linking with the global economy.

While the operations of the bank have become more and more 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 business manifold. And the old philosophy of sophistication banking has been changed by mass banking. The challenge in administration of social duty with economic viability has increased.

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