Abstract
In today's dynamic world, banking scams and frauds that are committed by willful defaulters are more technical and complex in nature. To tackle these crimes, banks need to improve their working system and technologies. In this chapter, cases of recent banking scams in India have been analyzed to find out the operational loopholes present in the system which led to such a crisis. Further, the measures taken by the Government of India to detect and prevent such scams have been discussed. On the basis of an in-depth study of the cases, researchers suggested certain feasible solutions to overcome such crises in the future. These recommendations shall prove useful to strengthen the banking sector, which is believed to be having considerable socio-economic significance to bring back confidence among the stakeholders and to safeguard the money of the masses.
TopBackground
The impacts of banking sector scams are most disastrous for any economy. It causes an imbalance in the entire economic system often leading to weakening of the money and securities market, which in turn negatively impacts the investors and common masses. Due to such banking scams, securities market faces huge crashes thereby affecting the economy in a massive way. This results in slowing down the economic growth and which in return often leads to weakening the economy and decreasing the foreign investments. When any banking sector scam came into light or a bank collapses, the whole public sentiment turns towards negative with it. This also leads to a shift in the public trust from the banks to other monetary means of the economy.
Though banking scams might not be new in India but repercussions of a scam are widespread these days. The frauds seem to be innovative in terms of modus operandi and are pretty huge by size. With the passage of time the dimensions of scams in the banking industry are changing. Hence, there is a need for a strong international frame to cope up with such emerging challenges and to minimize such scams. The legal structure needs to be strengthened and should be of an international form. The regulation needs to be stricter towards such crisis.
With the advancement of banking industry in India, scams and frauds in banks are also increasing very fast, and fraudsters have started using advanced means to escape from the frauds. It is also true that banks cannot be 100% secure against unidentified threats; a certain level of attentiveness can go a long way in disputing fraud risk (Bhasin, 2015). With this background the present study aims to address the issues and impacts of recent banking sector scams in India and the remedies thereof.
Key Terms in this Chapter
Willful Defaulter: A willful defaulter is a person or an entity that has not repaid the loan despite the ability to repay it.
Forensic Accounting: Forensic accounting is the in-depth investigation of fraud or financial manipulation by performing extremely detailed research and analysis of financial information.
NBFC: Under section 451 (f) of RBI Act, 1934 NBFC means a non-banking financial institution which is company engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business, etc.
NPA: According to Reserve Bank of India (RBI), a Non-Performing Asset (NPA) is defined as a credit facility in respect of which the interest and/or instalment of principal has remained 'past due' for a specified period of time.