Banking Fraud – Prevention and Control

Banking Fraud is posing menace to Indian Economy. Its vibrant effect might 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 an increase 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 becomes crucial that occurrence 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. As we speak, the banking system has entered into aggressive markets in areas covering resource mobilization, human resource development, customer providers and credit management as well.

Indian’s banking system has a number of excellent achievements to its credit, essentially the most placing of which is its reach. In reality, Indian banks at the moment are spread out into the remotest areas of our country. Indian banking, which was operating in a highly consolationable and protected atmosphere till the start of Nineties, has been pushed into the choppy waters of intense competition.

A sound banking system should possess three fundamental characteristics to protect depositor’s interest and public faith. Theses are (i) a fraud free culture, (ii) a time tested Best Observe Code, and (iii) an in house immediate grievance remedial system. All these situations 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 aim of lending or investment, deposits of money from the purpose of lending or funding, deposits of cash from the general 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 below strict obligation to pay the depositor. The bank due to this fact has to make sure at all times that the cash of the depositors is just not drawn fraudulently. Time has come when the safety facets of the banks should 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 numerous strategies that can be used to keep away from such frauds. A bank fraud is a deliberate act of omission or fee by any individual carried out in the course of banking transactions or within the books of accounts, leading to wrongful gain to any particular person 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, Felony Process Code, Indian Contract Act, and Negotiable Instruments Act regarding 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 modern society. It plays 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 strategy to assume its present stature. It has undergone a significant 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 in the world.

RESERVE BANK OF INDIA-ECONOMIC AND SOCIAL OBJECTIVE

The Reserve Bank of India has an essential function to play within the upkeep of the trade value of the rupee in view of the shut interdependence of international trade and nationwide economic development and well being. This facet is of the wider responsibly of the central bank for the maintenance of financial and monetary stability. For this the bank is entrusted with the custody and the management of country’s international reserves; it acts also because 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 were registered being outside the traditional purview of central banking. It also acts an essential regulator.

BANK FRAUDS: CONCEPT AND DIMENSIONS

Banks are the engines that drive the operations in the monetary sector, which is important 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 means of three stages. They have moved from the character based lending to ideology based lending to right this moment competitiveness primarily based lending within the context of India’s financial liberalization policies and the process of linking with the global economy.

While the operations of the bank have turn out to be more and more significant banking frauds in banks are additionally rising and fraudsters have gotten more and more sophisticated and ingenious. In a bid to keep pace with the changing times, 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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