The anatomy of banking frauds

What is Important?UPSC perspective:Prelims:NPAMains: Issues relating to improving the banking system


Why in News?

The recent Financial Stability Report of the Reserve Bank of India (RBI) shows, the Indian banking system detailed around 6,500 examples of frauds including over ₹30,000 crore in the last monetary .The Central Vigilance Commission (CVC) has also released the analysis of the main 100 banking frauds.

Issues relating to improving the banking system

* Most cheats demonstrate that banks did not do appropriate due persistence, both before and after disbursing loans.
* The FD fraud, for instance, demonstrates the poor level oof checks and balances in the banking system. Therefore, in order to check frauds, banks will need to improve their due diligence capabilities.
* This will prompt better credit appraisal and furthermore help contain non-performing assets (NPAs). As the monetary framework evolves, grows and gets more complex, banks should be better arranged to keep avoid frauds.
* It is likewise vital that banks use technology to detect frauds and enhance the sharing of data. 
* Further, similar to the PNB fraud, it is likely that in some cases bankers may have been complicit in cheats. 
* However, law authorization offices should tread with consideration so they don't wind up making a situation of dread, influencing the stream of credit to profitable parts.
*India needs a system where auditors and other professionals vetting fake documents are not able to escape
Way forward
*Some of the recent frauds and the accumulation of NPAs in the system show that Indian banks need significant improvements in operation and governance standards
*This is necessary as large frauds can increase reluctance in the banking system to lend, affecting the flow of credit
The anatomy of banking frauds The anatomy of banking frauds Reviewed by The Hindu Current Affairs on October 20, 2018 Rating: 5

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