Number Of Shares Of Common Stock Outstanding On Financial Statements Banking Fraud – Prevention and Control

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Banking Fraud – Prevention and Control

Banking Fraud is posing danger to Indian Economy. Its colourful impact can also be understood be the truth that within the yr 2004 selection of Cyber Crime have been 347 in India which rose to 481 in 2005 appearing an building up of 38.5% whilst I.P.C. class crime stood at 302 in 2005 together with 186 instances of cyber fraud and 68 instances cyber forgery. Thus it turns into crucial that incidence of such frauds will have to be minimized. More frightening is the truth that such frauds are coming into in Banking Sector as neatly.

In the prevailing day, Global Scenario Banking System has got new dimensions. Banking did unfold in India. Today, the banking machine has entered into aggressive markets in spaces protecting useful resource mobilization, human useful resource construction, buyer products and services and credit score control as neatly.

Indian’s banking machine has a number of exceptional achievements to its credit score, essentially the most putting of which is its achieve. In truth, Indian banks are actually unfold out into the remotest spaces of our nation. Indian banking, which was once running in a extremely comfy and safe surroundings until the start of Nineties, has been driven into the uneven waters of intense festival.

A legitimate banking machine will have to possess 3 fundamental traits to give protection to depositor’s passion and public religion. Theses are (i) a fraud loose tradition, (ii) a time examined Best Practice Code, and (iii) an in space rapid complaint remedial machine. All those stipulations are their lacking or extraordinarily vulnerable 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 money 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 if his cash has fraudulently been drawn from the financial institution the latter is underneath strict legal responsibility to pay the depositor. The financial institution subsequently has to make sure all the time that the cash of the depositors isn’t drawn fraudulently. Time has come when the safety sides of the banks need to be handled on precedence foundation.

The banking machine in our nation has been taking good care of all segments of our socio-economic arrange. The Article comprises a dialogue on the upward push of banking frauds and quite a lot of strategies that can be utilized to steer clear of such frauds. A financial institution fraud is a planned act of omission or fee by means of someone performed during banking transactions or within the books of accounts, leading to wrongful acquire to someone for a brief length or another way, without or with any financial loss to the financial institution. The related provisions of Indian Penal Code, Criminal Procedure Code, Indian Contract Act, and Negotiable Instruments Act with regards to banking frauds has been cited within the provide Article.

EVOLUTION OF BANKING SYSTEM IN INDIA

Banking machine occupies the most important position in a country’s economic system. A banking establishment is indispensable in a contemporary society. It performs a pivotal function in financial construction of a rustic and paperwork the core of the cash marketplace in a complicated nation.

Banking business in India has traversed a protracted approach to think its provide stature. It has passed through a significant structural transformation after the nationalization of 14 main industrial banks in 1969 and six extra on 15 April 1980. The Indian banking machine is exclusive and possibly has no parallels within the banking historical past of any nation on the planet.

RESERVE BANK OF INDIA-ECONOMIC AND SOCIAL OBJECTIVE

The Reserve Bank of India has the most important function to play within the repairs of the trade worth of the rupee in view of the shut interdependence of global business and nationwide financial expansion and neatly being. This side is of the broader responsibly of the central financial institution for the upkeep of monetary and monetary steadiness. For this the financial institution is entrusted with the custody and the control of nation’s global reserves; it acts additionally because the agent of the federal government in recognize of India’s club of the global financial fund. With financial construction the financial institution additionally plays plenty of developmental and promotional purposes which previously have been registered being outdoor the traditional purview of central banking. It additionally acts the most important regulator.

BANK FRAUDS: CONCEPT AND DIMENSIONS

Banks are the engines that force the operations within the monetary sector, which is necessary for the economic system. With the nationalization of banks in 1969, in addition they have emerged as engines for social alternate. After Independence, the banks have handed thru 3 levels. They have moved from the nature founded lending to ideology founded lending to nowadays competitiveness founded lending within the context of India’s financial liberalization insurance policies and the method of linking with the worldwide economic system.

While the operations of the financial institution have turn into an increasing number of vital banking frauds in banks also are expanding and fraudsters are turning into an increasing number of subtle and creative. In a bid to stay tempo with the converting occasions, the banking sector has different it trade manifold. And the previous philosophy of sophistication banking has been changed by means of mass banking. The problem in control of social accountability with financial viability has higher.

DEFINITION OF FRAUD

Fraud is outlined as “any behavior by which one person intends to gain a dishonest advantage over another”. In different phrases , fraud is an act or omission which is meant to motive wrongful acquire to 1 particular person and wrongful loss to the opposite, both by means of concealment of information or another way.

Fraud is outlined u/s 421 of the Indian Penal Code and u/s 17 of the Indian Contract Act. Thus crucial parts of frauds are:

1. There should be a illustration and statement;

2. It should relate to a truth;

3. It should be with the data that it’s false or with out trust in its reality; and

4. It should induce every other to behave upon the statement in query or to do or to not do positive act.

BANK FRAUDS

Losses sustained by means of banks because of frauds exceed the losses because of theft, dacoity, housebreaking and theft-all put in combination. Unauthorized credit score amenities are prolonged for unlawful gratification comparable to case credit score allowed towards pledge of products, hypothecation of products towards expenses or towards ebook money owed. Common modus operandi are, pledging of spurious items, inletting the price of products, hypothecating items to a couple of financial institution, fraudulent elimination of products with the data and connivance of in negligence of financial institution team, pledging of products belonging to a 3rd birthday celebration. Goods hypothecated to a financial institution are discovered to comprise out of date shares packed in between items shares and case of scarcity in weight isn’t unusual.

An research product of instances brings out extensively the underneath discussed 4 main parts answerable for the fee of frauds in banks.

1. Active involvement of the staff-both manager and clerical both impartial of exterior parts or in connivance with outsiders.

2. Failure at the a part of the financial institution team to observe meticulously laid down directions and tips.

3. External parts perpetuating frauds on banks by means of forgeries or manipulations of cheques, drafts and different tools.

4. There has been a rising collusion between trade, most sensible banks executives, civil servants and politicians in energy to defraud the banks, by means of getting the principles bent, rules flouted and banking norms thrown to the winds.

FRAUDS-PREVENTION AND DETECTION

A detailed find out about of any fraud in financial institution unearths many not unusual fundamental options. There could have been negligence or dishonesty at some level, on a part of a number of of the financial institution workers. One of them could have colluded with the borrower. The financial institution authentic could have been striking up with the borrower’s sharp practices for a private acquire. The right kind care which was once anticipated of the team, as custodians of banks passion would possibly not had been taken. The financial institution’s laws and procedures laid down within the Manual directions and the circulars would possibly not had been noticed or could have been intentionally omitted.

Bank frauds are the failure of the banker. It does now not imply that the exterior frauds don’t defraud banks. But if the banker is upright and is aware of his task, the duty of defrauder will turn into extraordinarily tricky, if now not imaginable.

Detection of Frauds

Despite all care and vigilance there would possibly nonetheless be some frauds, despite the fact that their quantity, periodicity and depth is also significantly decreased. The following process can be very useful if considered:

1. All related data-papers, paperwork and so on. Should be promptly gathered. Original vouchers or different papers forming the root of the investigation will have to be saved underneath lock and key.

2. All individuals within the financial institution who is also understanding one thing concerning the time, position a modus operandi of the fraud will have to be tested and their statements will have to be recorded.

3. The possible order of occasions will have to thereafter be reconstructed by means of the officer, in his personal thoughts.

4. It is beneficial to stay the central administrative center knowledgeable concerning the fraud and additional trends in regard thereto.

Classification of Frauds and Action Required by means of Banks

The Reserve Bank of India had set-up a top stage committee in 1992 which was once headed by means of Mr. A… Ghosh, the then Dy. Governor Reserve Bank of India to inquire into quite a lot of sides with regards to frauds malpractice in banks. The committee had spotted/noticed 3 main reasons for perpetration of fraud as given hereunder:

1. Laxity in observance of the laid down machine and procedures by means of operational and supervising team.

2. Over self belief reposed within the shoppers who indulged in breach of agree with.

3. Unscrupulous shoppers by means of taking benefits of the laxity in observance of established, time examined safeguards additionally dedicated frauds.

In order to have uniformity in reporting instances of frauds, RBI thought to be the query of classification of financial institution frauds at the foundation of the provisions of the IPC.

Given underneath are the Provisions and their Remedial measures that may be taken.

1. Cheating (Section 415, IPC)

Remedial Measures.

The preventive measures in recognize of the dishonest can also be targeting cross-checking relating to identification, genuineness, verification of details, and so on. in recognize of quite a lot of tools in addition to individuals thinking about encashment or coping with the valuables of the financial institution.

2. Criminal misappropriation of assets (Section 403 IPC).

Remedial Measure

Criminal misappropriation of assets, presuppose the custody or keep an eye on of price range or assets, so subjected, with that of the individual committing such frauds. Preventive measures, for this magnificence of fraud will have to be taken on the stage the custody or keep an eye on of the price range or assets of the financial institution in most cases vests. Such a measure will have to be enough, it’s prolonged to those individuals who’re in truth dealing with or having precise custody or keep an eye on of the fund or movable houses of the financial institution.

3. Criminal breach of agree with (Section 405, IPC)

Remedial Measure

Care will have to be taken from the preliminary step when an individual involves the financial institution. Care must be taken on the time of recruitment in financial institution as neatly.

4. Forgery (Section 463, IPC)

Remedial Measure

Both the prevention and detection of frauds thru forgery are essential for a financial institution. Forgery of signatures is essentially the most common fraud in banking trade. The financial institution will have to take particular care when the tool has been introduced both bearer or order; in case a financial institution will pay solid tool he can be accountable for the loss to the real costumer.

5. Falsification of accounts (Section 477A)

Remedial Measure

Proper diligence is needed whilst filling of paperwork and accounts. The accounts will have to be rechecked on day-to-day foundation.

6. Theft (Section 378, IPC)

Remedial Measures

Encashment of stolen’ cheque can also be avoided if the financial institution obviously specify the age, intercourse and two visual establish motion marks at the frame of the individual traveler’s cheques at the again of the cheque leaf. This will assist the paying financial institution to simply establish the cheque holder. Theft from lockers and protected deposit vaults aren’t simple to dedicate for the reason that master-key stays with the banker and the person key of the locker is passed over to the costumer with due acknowledgement.

7. Criminal conspiracy (Section 120 A, IPC)

In the case of State of Andhra Pradesh v. IBS Prasad Rao and Other, the accused, who have been clerks in a cooperative Central Bank have been all convicted of the offences of dishonest underneath Section 420 learn together with Section 120 A. all of the 4 accused had conspired in combination to defraud the financial institution by means of making false call for drafts and receipt vouchers.

8. Offences with regards to forex notes and banks notes (Section 489 A-489E, IPC)

These sections supply for the security of currency-notes and financial institution notes from forgery. The offences underneath phase are:

(a) Counterfeiting forex notes or banks.

(b) Selling, purchasing or the usage of as authentic, solid or counterfeit forex notes or financial institution notes. Knowing the similar to be solid or counterfeit.

(c) Possession of solid or counterfeit forex notes or bank-notes, understanding or counterfeit and intending to make use of the similar as authentic.

(d) Making or passing tools or fabrics for forging or counterfeiting forex notes or banks.

(e) Making or the usage of paperwork equivalent to currency-notes or financial institution notes.

Most of the above provisions are Cognizable Offences underneath Section 2(c) of the Code of Criminal Procedure, 1973.

FRAUD PRONE AREAS IN DIFFERENT ACCOUNTS

The following are the possible fraud inclined spaces in Banking Sector. In addition to these spaces I’ve additionally given varieties of fraud which might be not unusual in those spaces.

Savings Bank Accounts

The following are one of the vital examples being performed in recognize of financial savings financial institution accounts:

(a) Cheques bearing the cast signatures of depositors is also introduced and paid.

(b) Specimen signatures of the depositors is also modified, in particular after the loss of life of depositors,

(c) Dormant accounts is also operated by means of cheating individuals without or with collusion of financial institution workers, and

(d) Unauthorized withdrawals from buyer’s accounts by means of worker of the financial institution keeping up the financial savings ledger and later destruction of the new vouchers by means of them.

Current Account Fraud

The following sorts usually are dedicated in case of present accounts.

(a) Opening of frauds within the names of restricted corporations or companies by means of unauthorized individuals;

(b) Presentation and charge of cheques bearing solid signatures;

(c) Breach of agree with by means of the workers of the corporations or companies possessing cheque leaves duly signed by means of the licensed signatures;

(d) Fraudulent alteration of the quantity of the cheques and getting it paid both on the counter or despite the fact that every other financial institution.

Frauds In Case Of Advances

Following sorts is also dedicated in recognize of advances:

(a) Spurious gold adorns is also pledged.

(b) Sub-standard items is also pledged with the financial institution or their worth is also proven at inflated figures.

(c) Same items is also hypothecated in favour of various banks.

LEGAL REGIME TO CONTROL BANK FRAUDS

Frauds represent white-collar crime, dedicated by means of unscrupulous individuals deftly benefit of loopholes present in techniques/procedures. The ideally suited state of affairs is one there is not any fraud, however taking floor realities of the country’s surroundings and human nature’s fragility, an establishment will have to all the time love to stay the overreach of frauds on the minimal incidence stage.

Following are the related sections with regards to Bank Frauds

Indian Penal Code (45 of 1860)

(a) Section 23 “Wrongful gain”.-

“Wrongful gain” is acquire by means of illegal way of assets to which the individual gaining isn’t legally entitled.

(b) “Wrongful loss”

“Wrongful loss” is the loss by means of illegal way of assets to which the individual shedding it’s legally entitled.

(c) Gaining wrongfully.

Losing wrongfully-An individual is claimed to realize wrongfully when such particular person keeps wrongfully, in addition to when such particular person acquires wrongfully. A particular person is claimed to lose wrongfully when such particular person is wrongfully saved out of any assets, in addition to when such particular person is wrongfully disadvantaged of assets.

(d) Section 24. “Dishonestly”

Whoever does anything else with the goal of inflicting wrongful acquire to one particular person or wrongful loss to someone else, is claimed to try this factor “dishonestly”.

(e) Section 28. “Counterfeit”

A particular person is claimed to “counterfeit” who reasons something to resemble every other factor, intending by means of way of that resemblance to apply deception, or understanding it to be most likely that deception will thereby be practiced.

BREACH OF TRUST

1. Section 408- Criminal breach of agree with by means of clerk or servant.

2. Section 409- Criminal breach of agree with by means of public servant, or by means of banker, service provider or agent.

3. Section 416- Cheating by means of personating

4. Section 419- Punishment for dishonest by means of personation.

OFFENCES RELATING TO DOCMENTS

1) Section 463-Forgery

2) Section 464 -Making a false record

3) Section 465- Punishment for forgery.

4) Section 467- Forgery of treasured safety, will, and so on

5) Section 468- Forgery for goal of dishonest

6) Section 469- Forgery for goal of harming popularity

7) Section 470- Forged record.

8) Section 471- Using as authentic a solid record

9) Section 477- Fraudulent cancellation, destruction, and so on., of will, authority to undertake, or treasured safety.

10) Section 477A- Falsification of accounts.

THE RESERVE BANK OF INDIA ACT, 1934

Issue of call for expenses and notes Section 31.

Provides that handiest Bank and apart from equipped by means of Central Government might be licensed to attract, settle for, make or factor any invoice of trade, hundi, promissory observe or engagement for the charge of cash payable to bearer on call for, or borrow, owe or absorb any sum or sums of cash at the expenses, hundis or notes payable to bearer on call for of one of these particular person

THE NEGOTIABLE INSTRUMENTS ACT, 1881

Holder’s proper to replicate of misplaced invoice Section 45A.

1. The finder of misplaced invoice or observe acquires no name to it. The name stays with the actual proprietor. He is entitled to recuperate from the actual proprietor.

2. If the finder obtains charge on a misplaced invoice or observe in the end, the payee could possibly get a sound discharge for it. But the actual proprietor can recuperate the cash due at the tool as damages from the finder.

Section 58

When an Instrument is acquired by means of illegal way or for illegal attention no possessor or indorse who claims thru the one that discovered or so acquired the tool is entitled to obtain the quantity due thereon from such maker, acceptor or holder, or from any birthday celebration previous to such holder, except such possessor or indorse is, or some particular person thru whom he claims was once, a holder thereof in the end.

Section 85:

Cheque payable to reserve.

1. By this phase, bankers are positioned in privileged place. It supplies that if an order cheque is indorsed by means of or on behalf of the payee, and the banker on whom it’s drawn will pay it in the end, the banker is discharged. He can debit his buyer with the quantity so paid, despite the fact that the endorsement of the payee may turn into a forgery.

2. The declare coverage underneath this phase the banker has to turn out that the charge was once a charge in the end, in excellent religion and with out negligence.

Section 87. Effect of subject material alteration

Under this phase any alteration made with out the consent of birthday celebration can be void. Alteration can be legitimate provided that is made with not unusual goal of the birthday celebration.

Section 138. Dishonour of cheque for insufficiency, and so on., of price range within the account.

Where any cheque drawn by means of an individual on an account maintained by means of him with a banker for charge of any sum of money to someone else from out of that account for the release, in complete or partly, of any debt or different legal responsibility, is returned by means of the financial institution unpaid. both as a result of the amount of cash status to the credit score of that account is inadequate to honour the cheque or that it exceeds the quantity organized to be paid from that account by means of an settlement made with that financial institution, such particular person might be deemed to have dedicated an offence and shall, with out prejudice.

Section 141(1) Offences by means of corporations.

If the individual committing an offence underneath Section 138 is an organization, each one that, at the time the offence was once dedicated, was once accountable for, and was once accountable to, the corporate for the habits of the trade of the corporate, in addition to the corporate, shall be deemed to be responsible of the offence and shall be at risk of be proceeded towards and punished accordingly.

SECURITY REGIME IN BANKING SYSTEM

Security implies sense of protection and of freedom from risk or anxiousness. When a banker takes a collateral safety, say within the type of gold or a name deed, towards the cash lent by means of him, he has a way of protection and of freedom from anxiousness concerning the imaginable non-payment of the mortgage by means of the borrower. These will have to be communicated to all strata of the group thru suitable way. Before team managers will have to analyze present practices. Security process will have to be said explicitly and agreed upon by means of each and every person within the particular surroundings. Such practices be sure knowledge safety and toughen availability. Bank safety is basically a protection towards unforced assaults by means of thieves, dacoits and burglars.

PHYSICAL SECURITY MEASURES-CONCEPT

A big a part of banks safety depends upon social security features. Physical security features can also be outlined as the ones particular and particular protecting or defensive measures followed to discourage, locate, prolong, protect and defeat or to accomplish any a number of of those purposes towards culpable acts, either covert and covert and acclamations herbal occasions. The protecting or defensive, measures followed contain building, set up and deployment of constructions, apparatus and individuals respectively.

The following are few tips to test malpractices:

1. To rotate the money paintings throughout the team.

2. One particular person will have to now not proceed at the similar seat for greater than two months.

3. Daybook will have to now not be written by means of the Cashier the place an different particular person is to be had to the task

4. No coins withdrawal will have to be allowed inside of passbook in case of withdrawal by means of pay order.

5. The department supervisor will have to make certain that all team participants have recorder their presence within the attendance registrar, sooner than beginning paintings.

Execution of Documents

1. A financial institution officer should undertake a strict skilled method within the execution of paperwork. The ink and the pen used for the execution should be maintained uniformly.

2. Bank paperwork will have to now not be typed on a typewriter for execution. These will have to be invariably handwritten for execution.

3. The execution will have to all the time be achieved within the presence of the officer answerable for download them,

4. The debtors will have to be requested to check in complete signatures in similar taste all over the paperwork.

5. Unless there’s a particular requirement within the record, it will have to now not be were given attested or witnessed as such attestation would possibly alternate the nature of the tools and the paperwork would possibly topic to advert volrem stamp accountability.

6. The paper on which the financial institution paperwork are made will have to be pilfer evidence. It will have to be distinctive and to be had to the banks handiest.

7. The printing of the financial institution paperwork will have to have extremely creative intricate and sophisticated graphics.

8. The paperwork accomplished between Banker and Borrowers should be saved in protected custody,

CHANGES IN LEGISLATIONS AFTER ELECTRONIC TRANSACTIONS

1. Section 91 of IPC might be amended to incorporate digital paperwork additionally.

2. Section 92 of Indian Evidence Act, 1872 might be amended to incorporate commuter founded communications

3. Section 93 of Bankers Book Evidence Act, 1891 has been amended to present criminal sanctity for books of account maintained within the digital shape by means of the banks.

4. Section 94 of the Reserve Bank of India Act, 1939 might be amended to facilitate digital fund transfers between the monetary establishments and the banks. A brand new clause (pp) has been inserted in Section 58(2).

RECENT TRENDS OF BANKING SYSTEM IN INDIA

In the banking and monetary sectors, the advent of digital era for transactions, agreement of accounts, book-keeping and all different similar purposes is now an crucial. Increasingly, whether or not we love it or now not, all banking transactions are going to be digital. The thrust is on commercially essential facilities, which account for 65 p.c of banking trade with regards to worth. There are actually numerous totally automatic branches around the nation.

A switchover from cash-based transactions to paper-based transactions is being sped up. Magnetic Ink personality popularity clearing of cheques is now operational in lots of towns, beside the 4 metro towns. In India, the design, control and legislation of electronically-based bills machine are turning into the focal point of coverage deliberations. The imperatives of creating an efficient, environment friendly and rapid charge and agreement techniques are getting sharper with advent of recent tools comparable to bank cards, telebanking, ATMs, retail Electronic Funds Transfer (EFT) and Electronic Clearing Services (ECS). We are shifting against sensible playing cards, credit score and monetary Electronic Data Interchange (EDI) for directly thru processing.

Financial Fraud (Investigation, Prosecution, Recovery and Restoration of assets) Bill, 2001

Further the Financial Fraud (Investigation, Prosecution, Recovery and Restoration of assets) Bill, 2001 was once offered in Parliament to curb the risk of Bank Fraud. The Act was once to ban, keep an eye on, examine monetary frauds; recuperate and repair houses topic to such fraud; prosecute for inflicting monetary fraud and issues attached therewith or incidental thereto.

Under the mentioned act the time period Financial Fraud has been outlined as underneath:

Section 512 – Financial Fraud

Financial frauds way and contains any of the next acts dedicated by means of an individual or together with his connivance, or by means of his agent, in his dealings with any financial institution or monetary establishment or some other entity protecting public price range;

1. The advice, as a truth, of that which isn’t true, by means of one that does now not consider it to be true;

2. The lively concealment of a truth by means of one having wisdom or trust of the truth;

3. A promise made without any goal of appearing it;

4. Any different act suited for mislead;

5. Any such act or omission because the regulation specifically announces to be fraudulent.

Provided that whoever acquires, possesses or transfers any proceeds of economic fraud or enters into any transaction which is said to proceeds of fraud both at once or not directly or conceals or aids within the concealment of the proceeds of economic fraud, commits monetary fraud.

513(a) – Punishment for Financial Fraud

Whoever commits monetary fraud might be: (a) Punished with rigorous imprisonment for a time period, which would possibly lengthen to seven years and shall even be at risk of nice.

(b)Whoever commits critical monetary fraud might be punished with rigorous imprisonment for a time period which would possibly lengthen to 10 years however shall now not be lower than 5 years and shall even be accountable for nice as much as double the quantity thinking about such fraud.

Provided that during either (a) and (b) all price range, financial institution accounts and houses got the usage of such price range subjected to the monetary fraud as would possibly somewhat be attributed by means of the investigating company might be recovered and restored to the rightful proprietor in step with the process established by means of regulation.

CONCLUSION

The Indian Banking Industry has passed through super expansion since nationalization of 14 banks within the yr 1969. There has a nearly 8 occasions building up within the financial institution branches from about 8000 all over 1969 to mote than 60,000 belonging to 289 industrial banks, of which 66 banks are in personal sector.

It was once the results of two successive Committees on Computerization (Rangarajan Committee) that set the tone for computerization in India. While the primary committee drew the blue print in 1983-84 for the mechanization and computerization in banking business, the second one committee arrange in 1989 cleared the path for built-in use of telecommunications and computer systems for making use of technogical breakthroughs in banking sector.

However, with the unfold of banking and banks, frauds had been on a relentless building up. It generally is a herbal corollary to extend within the selection of consumers who’re the usage of banks at the moment. In the yr 2000 by myself we’ve got misplaced Rs 673 crores in as many as 3,072 selection of fraud instances. These are handiest reported figures. Though, that is 0.075% of Rs 8,96,696 crores of overall deposits and zero.15% of Rs 4,44,125 crores of loans & advances, there are any numbers of instances that aren’t reported. There have been just about 65,800 financial institution branches of a complete of 295 industrial banks in India as on June 30, 2001 reporting a complete of just about 3,072 financial institution fraud instances. This makes just about 10.4 frauds consistent with financial institution and kind of 0.47 frauds consistent with department.

An Expert Committee on Bank Frauds (Chairman: Dr.N.L.Mitra) submitted its Report to RBI in September 2001. The Committee tested and urged either the preventive and healing sides of financial institution frauds.

The essential suggestions of the Committee come with:

o A necessity for together with monetary fraud as a prison offence;

o Amendments to the IPC by means of together with a brand new bankruptcy on monetary fraud;

o Amendments to the Evidence Act to shift the weight of evidence at the accused particular person;

o Special provision within the Cr. PC for houses concerned within the Financial Fraud.

o Confiscating illegal good points; and preventive measures together with the advance of Best Code Procedures by means of banks and monetary establishments.

Thus it may be concluded that following measures will have to essentially be followed by means of the Ministry of Finance so as to cut back instances of Fraud.

o There should be a Special Court to check out monetary fraud instances of great nature.

o The regulation will have to supply separate structural and restoration process. Every financial institution should have a home enquiry officer to investigate concerning the civil measurement of fraud.

o A fraud involving an quantity of ten crore of rupees and above is also thought to be critical and be attempted within the Special Court.

The Twenty-ninth Report of the Law Commission had dealt some classes of crimes one in every of which is “offences calculated to prevent and obstruct the economic development of the country and endanger its economic health.” Offences with regards to Banking Fraud will fall underneath this class. The maximum essential function of such offences is that ordinarily they don’t contain a person direct sufferer. They are punishable as a result of they hurt the entire society. It is obvious that cash thinking about Bank belongs to public. They deposit there complete lifestyles’ safety in Banks and in case of Dacoity or Robbery in banks the general public shall be al misplaced. Thus it will be important that enough efforts will have to be taken on this regard.

There exists a brand new more or less danger in cyber international. Writers are referring it as “Salami Attack” underneath this a distinct tool is used for moving the quantity from the account of the person. Hence the culprits of such crimes will have to be discovered temporarily and will have to be given strict punishment. Moreover there may be requirement of extra selection of IT execs who will assist find an answer towards some of these safety threats.

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