Who is the culprit of Bank Fraud?

Need of hour is to identify them and punish them harshly, unless it is futile to expect any improvement.

Bank scams or disturbances cannot be ignored by blaming some fugitive economic accused or NPA. Without the collusion of financial / bank institutions, it is useless to imagine such a huge economic loss. Dr. SantoshKumar Bagla says that it is unfortunate that as soon as such disturbances arise, people of these institutions or important people in other positions get involved in divert the case, as if it is their personal matter. Unless we identify them and punish them harshly, it is futile to expect any improvement.

Latest report says that Over 6,800 cases of bank fraud involving an unprecedented Rs 71,500 crore have been reported in 2018-19, the Reserve Bank of India has said. A total of 5,916 such cases were reported by banks in 2017-18 involving Rs 41,167.03 crore, it said. That amounts to a 15% rise in volume and 80% climb in value from last year.

The Indian banking sector has experienced considerable growth and changes since liberalisation of economy in 1991. Though the banking industry is generally well regulated and supervised, the sector suffers from its own set of challenges when it comes to ethical practices, financial distress and corporate governance. A report touches upon the case of rising NPAs in the past few years across various scheduled commercial banks, especially public sector banks as Non-performing assets, Stressed assets etc.

According to Dr.Santosh Kumar Bagla instances of financial fraud have regularly been reported in India. Although banking frauds in India have often been treated as cost of doing business, post liberalisation the frequency, complexity and cost of banking frauds have increased manifold resulting in a very serious cause of concern for regulators, such as the Reserve Bank of India (RBI). RBI, the regulator of banks in India, defines fraud as “A deliberate act of omission or commission by any person, carried out in the course of a banking transaction or in the books of accounts maintained manually or under computer system in banks, resulting into wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the bank”

The robustness of a country’s banking and financial system helps determine its production and consumption of goods and services. It is a direct indicator of the well-being and living standards of its citizens. Therefore, if the banking system is plagued with high levels of NPAs then it is a cause of worry, because it reflects financial distress of borrower clients, or inefficiencies in transmission mechanisms. Indian economy suffers to a great extent from these problems, and this served as the prime motivation for the authors to carry out this detailed study of frauds in the Indian banking system and examining frauds from different angles.