Banking Frauds in India: A Critical Analysis of Regulatory Framework and Preventive Mechanisms

Abstract

This paper is aiming the study of various Banking Frauds happened bank wise in India which have adversely impacted the performance of banks. After the turmoil of various banking frauds which have committed in the banking sector have shaken the roots of banks. The banking frauds comprising of various types of frauds i.e. Frauds in Deposits segment, Frauds in Advances segment, Frauds in Foreign Exchange Business and Frauds through Technology that is popularly known as Cybercrime frauds have adversely affected the health of the Banking in India which leads to increasing NPA (Non-Performing Assets) of the Bank. Reserve Bank of India (RBI) the Controller of Banks, who is responsible to frame the rules and issue the guidelines to control the Banks. Banks have to follow various International norms so that to maintain the good health Banks have to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), Capital Adequacy and also provision for NPA. Sometimes banks have to go in the market for various types of Bonds & shares even in call money market to maintain various ratios on higher rate of interest. The margin of Banks Assets & Liabilities have already squeezed to minimal level and the cost of funds have increased and if Bank have to make provision major on Non-Performing Assets (NPA) along with other provisions, which have turned Banks into Lossmaking banks and result are numbers of Public Sector banks have come down from 20 to 12 which may further go for consolidation.