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Banking Fraud – Prevention and Management

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Banking Fraud is posing risk to Indian Economy. Its vibrant effect may be understood be the fact that within the 12 months 2004 number of Cyber Crime have 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 68 cases cyber forgery. Thus it becomes crucial that occurrence of such frauds ought to be minimized. More upsetting is the truth that such frauds are getting into in Banking Sector as well.

In the present day, Global Scenario Banking System has acquired new dimensions. Banking did spread in India. As we speak, the banking system has entered into competitive markets in areas covering resource mobilization, human useful resource development, buyer services and credit management as well.

Indian’s banking system has a number of outstanding achievements to its credit, essentially the most striking of which is its reach. The truth is, 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 guarded setting till the beginning of Nineties, has been pushed into the choppy waters of intense competition.

A sound banking system should possess three primary characteristics 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 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 investment, deposits of cash from the purpose of lending or investment, deposits of cash from the public, repayable on demand or in any other case and withdraw able by cheque, draft, order or otherwise.” But if his money has fraudulently been drawn from the bank the latter is underneath strict obligation to pay the depositor. The bank therefore has to ensure always that the money of the depositors is not drawn fraudulently. Time has come when the security elements of the banks must be handled on precedence basis.

The banking system in our country has been taking care of all segments of our socio-economic set up. The Article contains a discussion on the rise of banking frauds and various 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, leading to wrongful gain to any particular person for a brief interval or otherwise, 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 regarding banking frauds has been cited in the current 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 contemporary society. It performs a pivotal role in economic development of a country and varieties the core of the money market in an advanced country.

Banking business in India has traversed a protracted strategy to assume its current stature. It has undergone a serious structural transformation after the nationalization of 14 major industrial 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 within the world.

RESERVE BANK OF INDIA-ECONOMIC AND SOCIAL OBJECTIVE

The Reserve Bank of India has an vital function to play within the upkeep of the trade worth of the rupee in view of the shut interdependence of worldwide trade and nationwide economic progress and well being. This side is of the wider responsibly of the central bank for the upkeep of financial and financial stability. For this the bank is entrusted with the custody and the management of country’s worldwide reserves; it acts also as the agent of the federal government in respect of India’s membership of the international monetary fund. With financial development the bank additionally performs a variety of developmental and promotional functions which in the past had been registered being outside the normal purview of central banking. It additionally acts an vital regulator.

BANK FRAUDS: CONCEPT AND DIMENSIONS

Banks are the engines that drive the operations within the financial sector, which is significant 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 through three stages. They’ve moved from the character based mostly lending to ideology based mostly lending to right now competitiveness 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 change into more and more significant banking frauds in banks are additionally growing 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 replaced by mass banking. The challenge in administration of social duty with economic viability has increased.

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