Banking Fraud – Prevention and Control

Banking Fraud is posing risk to Indian Economy. Its vibrant effect might be understood be the truth that within 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. class crime stood at 302 in 2005 together with 186 cases of cyber fraud and sixty eight cases cyber forgery. Thus it turns into essential that incidence of such frauds ought to be minimized. More upsetting is the fact that such frauds are coming into in Banking Sector as well.

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

Indian’s banking system has several excellent achievements to its credit, essentially the most putting of which is its reach. In fact, Indian banks are now spread out into the remotest areas of our country. Indian banking, which was working in a highly consolationable and guarded surroundings until the beginning of 1990s, has been pushed into the choppy waters of intense competition.

A sound banking system should possess three fundamental traits to guard depositor’s curiosity and public faith. Theses are (i) a fraud free culture, (ii) a time tested Best Observe Code, and (iii) an in house rapid grievance remedial system. All these conditions are their missing or extremely 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 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 money 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 ensure at all times that the cash of the depositors isn’t drawn fraudulently. Time has come when the security elements of the banks need to be handled on priority basis.

The banking system in our country has been taking care of all segments of our socio-financial set up. The Article comprises a discussion on the rise of banking frauds and various methods that can be utilized to avoid 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 within the books of accounts, resulting in wrongful acquire to any particular person for a short lived interval or otherwise, with or with none monetary loss to the bank. The relevant provisions of Indian Penal Code, Prison Procedure Code, Indian Contract Act, and Negotiable Instruments Act referring to banking frauds has been cited within the current Article.

EVOLUTION OF BANKING SYSTEM IN INDIA

Banking system occupies an vital place in a nation’s economy. A banking institution is indispensable in a modern society. It plays a pivotal function in financial development of a country and forms the core of the money market in an advanced country.

Banking industry in India has traversed a long way to assume its current 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 perhaps 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 necessary function to play in the upkeep of the change value of the rupee in view of the shut interdependence of international trade and nationwide financial growth 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 management of country’s international reserves; it acts also because the agent of the federal government in respect of India’s membership of the worldwide monetary fund. With financial development the bank additionally performs a wide range of developmental and promotional features which up to now have been registered being outside the traditional 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 financial sector, which is important for the economy. With the nationalization of banks in 1969, they also 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 mostly lending to at present 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 change into increasingly significant banking frauds in banks are additionally increasing and fraudsters are becoming more and more sophisticated and ingenious. In a bid to keep pace with the altering occasions, the banking sector has diversified it enterprise manifold. And the old philosophy of sophistication banking has been changed by mass banking. The problem in administration of social accountability with financial viability has increased.

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