To study the fraud prevention and control in banking

system
A Project Submitted to

University of Mumbai for partial completion of the

Degree of Bachelor in Commerce (Accounting and

Finance)

Under the Faculty of Commerce

By

Sayali Subhash Gadge

Roll No.-109

Under the Guidance of

Ms. Rinky Rajwani mam

B. K. Birla College of Arts, Science and Commerce (Autonomous), Kalyan

April 2019-2020
 B. K. Birla College of Arts, Science and Commerce (Autonomous), Kalyan
B.K. Birla College Road, Kalyan (West)

Certificate

This is to certify that Ms. Sayali Subhash Gadge has worked and duly completed

her project for the degree of Bachelor in Commerce (Accounting & Finance)

under the Faculty of Commerce and her project is entitled, “To study the fraud

prevention and control in banking system ” under my Supervision.

Name and Signature of Guiding Teacher

Seal of the
College

Date of submission:
 Declaration by Student

I, the undersigned Miss Sayali Subhash Gadge , hereby declare that the

work embodied in this project work titled “To study the fraud

prevention and control in banking system ”, forms my own contribution to the

research work carried out under the guidance of Ms. Rinky Rajwani mam is a

result of my own research work and has not been previously submitted to any other

University for any other Degree to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly

indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and

presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

 Acknowledgment

To list who all have helped me is difficult because they are so

numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels

and fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving

me chance to do this project.

I would like to thank our Director (Education) and Principal for

providing the necessary facilities required for completion of this
project.

I take this opportunity to thank our Coordinator, for his moral support
and guidance.

I would also like to express my sincere gratitude towards my project guide

Ms. Rinky Rajwani mam whose guidance and care made the project
successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.

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 Index-I

Chapter No Content Page No

1 Introduction 5 - 30

1.1 Topic 5 – 28

1.2 Statement of problem and Need

29
of the study
30
1.3 Rational of study

2 Research Methodology 31 - 34

31
2.1 Objective

2.2 Hypothesis 32

2.3 Scope of the study

33
2.4 Limitations
34
2.5 R.M

3 Review Of Literature 35 - 41

Data Analysis, Interpretation and 44 - 73

4 Presentation

5 Conclusion and Suggestions 74 - 75

2
 ❖ References 76 - 77

❖ Appendices 77 - 81

▪ Questions 77 - 81

▪ Abbreviations

Index-II
(List of Tables)
Chapter Page
No Name of Tables No
4 Descriptive statistical analysis 60

4 Analysis between profitably and gender (Annona single factor) 61

4 Analysis between NPAs and gender (Annona single factor) 62

Analysis between solution and control of bank fraud and gender 63

4 (Annona single factor)

4 Analysis between causes and banks (Annona single factor) 64 - 65

4 Analysis between profitably and banks (Annona single factor) 66

4 Analysis between economy and banks (Annona single factor) 66

Analysis between trust of customer and banks (Annona single 67

4 factor)

4 Analysis between NPAs and banks (Annona single factor ) 67 - 68

4 68 - 73
Analysis between solution and control of bank fraud and banks

3
 (Annona single factor)

Index-III
(List of Charts and Graphs)
Chapter Page
No Name of Charts and Graphs No
4 Gender 42

4 Age 43

4 Banks 44

4 Lack of Training 45

4 Lack of adequate supervision of top management 46

4 Heightened by technological advancements in recent times 47

4 Profitability 48

4 Integrity and stability of the economy 49

4 Trust and confidence of customer 50

4 NPAs 51

4 Hiring of educated and more qualified people 52

4 Proper and regular audit can control 53

4 Forensic accounting 54

4 Education, training and awareness programmed 55

4 Charging penalties 56

4
 4 OTP 57

4 Thumb impression 58

4 Accuracy and reliability in accounting records 59

CHAPTER 1: INTRODUCTION

1.1 TOPIC

1.1.1 INTRODUCTION (BACKGROUND)

Bank is an institution that accepts deposits of money from the public.

The Indian banking industry has its foundations in the 18th century, and has had
a varied evolutionary experience since then.
As per the Reserve Bank of India (RBI), India’s banking sector is
sufficiently capitalized and well-regulated. The financial and economic conditions
with in the country are far superior to any other country with in the world. Credit,
market and liquidity risk studies suggest that Indian banks are generally resilient and
have withstood the global downturn well.
Indian banking industry has recently witnessed the roll out of
innovative banking models like payments and small finance banks. The initial banks
in India were primarily traders’ banks engaged only in financing activities. Financial
inclusion remains the highest most priority of the Government of India (GOI) and the
creation of small finance banks and payment banks are aimed at furthering the
financial inclusion in the economy. The structure of banking system differs from
country to country depending upon their economic conditions, political structure, and
financial system.

A banking system also referred as a system provided by the bank which

offers cash management services for customers, reporting the transactions of their
accounts and portfolios, throughout day. The banking system India should not only be
hassle free but it should be able to meet the new challenges posed by the technology
and any other external and internal factors.

For past three decades, India’s banking system has several outstanding
achievements to its credit. The banks are the main participants of the financial system
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in India. The Banking sector offers several facilities and opportunities to their
customers. All the banks safeguard the money and valuables and provide loans, credit,
and payment services, such as checking accounts, money order, and cashier’s
cheques.

1.1.2 FRAUD

Fraud can be defined as a deceit or trick deliberately practiced in

order to gain some advantages dishonestly.

Frauds take place when an individual deliberately practices

deception so as to realize something unlawfully or unfairly. In most states, the act can
be classified as either a civil or a criminal wrong (Source: legal dictionary). In other
words, fraud includes deception, bribery, forgery, extortion, corruption, theft,
conspiracy, embezzlement, misappropriation, false representation, and concealment
by bad faith, dishonesty, unfairness, perfidy and therefore the likes. In all cases, it
involves a person or persons in public office and is always aimed at receiving
financial benefit either immediately or in the future.

Fraud may be a broad legal term referring to dishonest acts that

intentionally use deception to illegally deprive another person or entity of money,
property, or legal rights.

1.1.3 BANK FRAUD

One of the most important responsibilities is the bank and financial
institution has is to protect the integrity of the institution by working hard to protect
the financial assets that it holds. In order to do so, the bank or financial institution
must be certain to address the issue of bank fraud. Bank Fraud can be defined as an
unethical or criminal act by an individual or organization to illegally attempts to
possess or receive money from a bank or financial institution.

6
 Bank fraud is the use of potentially illegal means to get cash, assets,
or other property owned or held by a financial institution, or to get cash
from depositors by fraudulently move as a bank or other financial institution. In many
instances, bank fraud is a criminal offence. While the specific elements of particular
banking fraud laws vary depending on jurisdictions, the term bank fraud applies to
actions that use a theme or reuse, as against bank theft.

Bank fraud is that the criminal offence of knowingly executing or

attempting to execute a scheme or artifice to defraud a financial organization, or to
obtain property owned by or under the control of a financial institution by means of
false or fraudulent pretenses, representations or promises. (Source: Legal definition).
Bank fraud is distinguished from bank robbery by the very fact that the perpetrator
keeps the crime secret within the hope that nobody notices until he has gotten away.

Bank fraud usually involves some type of activity at a bank where

falsified documentation or applications are provided. These could be given by
providing a form of a check, using someone’s identity, and employing other means to
withdraw money. Another form of this is accomplished through postal mail asking for
income through various schemes where the person believes he or she is providing
charity for some agency. Sending forged checks through the mail is also part of these
schemes. Credit card fraud includes providing inaccurate and completely wrong
information to garner a credit card for use when no paying off of the bill is possible or
intended. All these activities are usually considered to be federal crimes.

1.1.4 FINANCIAL FRAUD

Any attempt to deceive another for financial gain. A clear example of

fraud is selling a new issue that doesn't really exist. That is, the company can collect
money from investors and, instead of use it to finance operations, pocket the cash and
do nothing. There are a number of types of fraud. Common types include forgery of
documents, false claims in insurance, and filing bankruptcy to avoid debt instead
of due to financial hardship.

7
 Financial fraud occurs when someone takes money or other assets
from you through deception or criminal activity.

Financial fraud can be broadly defined as an intentional act of

deception involving financial transactions for purpose of personal gain. Fraud is a
crime and is also a civil law violation. Many fraud cases involve
complicated financial transactions conducted by 'white collar criminals' such
as business professionals with specialized knowledge and criminal intent.

The Forms of Financial Fraud

"There are no new forms of financial fraud; in the last hundred years there have only
been small variations of a few classic designs."
- John Kenneth Galbraith

1.1.5 TYPES OF FINANCIAL FRAUD

Credit and Debit Card

Identity Fraud Phishing Fraud

Card Skimming Investment Schemes Morgage Fraud

Facility Takeover Loan Fraud

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 1. Identity Fraud

Someone uses your personal information to steal money.

Identity fraud is common on internet. Identify Theft may be a crime that involves the
illegal access and use of an individual’s personal and/or financial information.
Identity theft may result in financial loss and seriously damage a victim's credit
history, requiring substantial effort to repair. Identity theft often sets in motion, or
makes a victim more vulnerable, to other types of financial fraud. Identity theft may
be committed against anyone whose personally identifiable information (name, Social
Security number, credit card number, date of birth, etc.) is exposed.

2. Phishing
Internet Banking clients receive e-mails which are tricky asking
them to give account login, password and personal details to website which look like
their legitimate bank. These details are then exploited to steal money from your
account.

In this case, a criminal poses as a daily service provider or the

bank where the victim has his or her account opened. He/she then proceeds to request
personal information. In order to prevent this, you can refrain from responding to
suspicious requests, even if they are from your regular internet service provider or
bank, for example. When doubt, it's better to double check if the agency, bank,
provider or the respective entity has indeed made the formal request.

3. Credit and debit card fraud

This is common on the internet, especially when the victim is
naive or too eager to help a supposed friend in need or an urgent cause. Sharing bank
details over social media isn't recommended. If you are doing need to give
information to friend, you should at least confirm with him or her that he/she is indeed
the one who sent the distressed message asking for financial aid. In real
emergencies, you should try to contact that person via telephone to
determine payment details.

9
 4. Card skimming
This is done by tampering with the ATM so that the device will
record the card PIN. You can make sure to check for signs of tampering, avoid ATMs
that are located outside and always protect your card PIN. You can also make sure to
report any suspicious transaction or activity.

This involves stealing information off a credit card during a

legitimate transaction. Fraudsters swipe the card through an electronic device referred
to as a “wedge” or “skimming device” which records all information contained on the
magnetic strip. Fraudsters use the stolen information for online purchase or to
reproduce the card.

5. Investment schemes

Nearly everyone today has heard of Pyramid schemes and Ponzi

schemes. This is a common type of investment fraud that provides money to old
investors that was received by new investors. This money is happened as returns from
an investment; although, in most cases, an actual investment was never made. There
are a few characteristics that most Ponzi schemes share, including unregistered
investments, complex strategies, and high yet consistent returns.

6. Mortgage Fraud

This financial crime includes different types of illegal schemes

involving some sort of misrepresentation or misstatement on mortgage forms and
documents. The Fraud Enforcement and Recovery Act, or FERA, helped to expand
the reach of federal enforcement officials in cracking down on mortgage fraud.

7. Facility takeover

Facility takeover is when an existing financial service, such as

a bank account or credit card, is taken over by a fraudster using stolen information to
pose as the account holder. This could be achieved in a variety of ways such as
intercepting a PIN code, resetting a password using security questions or by stealing a
credit or debit card.

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 Facility takeover can often be detected by keeping a close eye on
your account activity and investigating any unusual purchases with your bank or card
issuer. Your bank’s dedicated fraud team should also be looking for any signs of
unusual activity and may even suspend your account if they suspect fraud is taking
place.

8. Loan Fraud

Frauds related to loan and advances occupy the largest share in

the total number of bank’s fraud i.e. 64% of the total amount involved in the total
frauds. The loan and advance related frauds show that there is tremendous rise in the
past years

1.1.6 CAUSES OF BANK FRAUD

Causes of bank fraud can be classified into Institutional and Environmental factors.

Institutional factor:

Institutional factor are those factors who can trace the internal factors of organization.
The followings are the Institutional factor:

● Week accounting and internal control system.

● Poor information technology and data base management.
● Inadequate supervision of subordinates.
● Disregards for “know your customer” rule.
● Poor book keeping
● General frustration occasioned by management unfulfilled promise.
● Bank experience of staff: frauds in banks occur with higher rate of recurrence
among staff with little experience and knowledge in financial praxis.
11
 ● Inadequate infrastructure: poor communication system and power failure,
result to a build-up of unbalance posting, overcrowded office space etc. these
encourage the committal of fraud in bank.
● Poor salaries and conditions of services.
● Absence of detailed operational manual.

Environmental factors:

Environmental factors are those factors who can trace to the immediate and remote
environment of the bank .The following are the Environmental factors:

● Personality Profile of Dramatise Personae; most individuals with inordinate

ambitions without qualms are prone to committing frauds. These kinds of
individual are bent on making money by hook or crook, and to them the end
justifies the means.
● Greed: This refers to an inner-drive by individuals (staff) to acquire financial
gains far beyond their income and immediate or long-term needs. It is usually
driven by a morbid desire to get rich quick, in order to live a life of opulence
and extravagance. Greed has in many cases been considered the only most
important causes of fraud within the banking sector.
● Lack of Effective Deterrent/Punishment: This is often a moot point
because it's argued in some quarters that lack of effective deterrents like heavy
punishment might be an element that contributes to the high perpetration of
frauds In financial institutions
● Fear of Negative Publicity: Many financial institutions fail to report fraud
cases to the authorities. They believe that doing so will give unnecessary
negative publicity to their institution.
● Stiff competition in the banking industry which saw many banks engaging in
fraud so as to meet up in terms of liquidity and profitability.

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1.1.7 IMPACT OF FRAUDS IN THE CONTINUOUS RISE OF
NPAS IN THE BANK SECTOR.

The Narasimhan committee introduced the concept of non- performing

assets. Nowadays non-performing asset is kept on increasing in both public sector
banks and private sector banks due to fraud. NPA hurts funds over banks in capital
markets. Non-performing assets are the only reasons to fall on revenue.

⮚ LIQUIDITY POSITION
If the bank evaluates less capital the future business concern, which affects the
position of banks and creating a mismatch between the assets and liability and they
force the bank to raise the resources at a high rate. So, there will be an impact on the
profitability of banks, were they not able to recover the amount from the borrower the
level of profits will come down.

⮚ UNDERMINE BANK’S IMAGE

Increase in non-performing assets which shadows the domestic markets and global
level markets, on that situation the bank profitability decreases which lead to the bad
image to banks.

➢ EFFECT ON FUNDING
Increase in non-performing assets leads to scarcity in funding to other borrowers. As
well as the Indian capital market also get affected. And then there will be only a few
banking institutions lend money.

⮚ HIGHER COST OF CAPITAL

It shall result in increasing the cost of capital as banks will now have to keep aside
more funds for smooth operations.

⮚ HIGH RISK
High on non-performing assets, low profitability, high risk in business and work
against the bank and may take the two circumstances survival of the bank. And it
affects the risk-bearing capacity of the bank.

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 ⮚ BANK PROFITABILITY
The which makes low profits have lower capital adequacy ratio and the low capital
ratio which limits the further creation of assets. Such kind of banks face difficulties in
their growth, expansion, and plans and there they need not wherewithal to March
boldly on these fronts. In these growth failures in the expansion, the only
consequences and stagnation and negative growth.

a. They reduce net interest income as they do not charge the interest to these
accounts.
b. Servicing non-performing assets need to be prudentially provided for. This
will again lead to reduced profitability.

1.1.8 EFFECTS OF FRAUD ON BANKING SECTOR

Banks all over the world have through their unique position in their
economies contributed immensely to the economic growth and development of
nations. Therefore, any problem that tends to hinder their operation, such as
fraudulent practices, is viewed with seriousness. For some time now, the Ghanaian
banking system has suffered from fraudulent practices perpetrated by bank employees
– people outside the bank as well as corporate bodies.

❖ In the first place, fraud results in huge financial losses to banks, and such
losses affect the profit level of banks which would have been available for
distribution to shareholders. Losses from fraud which are absorbed by the
equity capital of a bank impair the bank’s financial health, affect liquidity
position, and constrain the bank’s ability to extend loans and advances for
profitable operations. Fraud reduces organizational assets and increases its
liabilities, which impede the going-concern status of the bank.
❖ In extreme cases, rampant and large incidence of fraud could lead to a bank’s
failure (i.e. the collapse or liquidation of a bank due to inability to meet

14
 deposition obligations or technical bank eligibility standards prescribed by the
central bank).
❖ Fraud can increase the operating cost of a bank because of the added cost in
installing the necessary machinery for its detection, prevention and protection
of assets.
❖ Moreover, devoting valuable time to safeguarding its assets from fraudulent
people distracts management. This unproductive diversion of resources
reduces output and lowers profit, which in turn could retard growth of the
bank.
❖ Today, various banks cannot withstand the growing pressure of competition
among various competitors due to a monster called bank fraud. Equally, the
confidence placed on banks is fast eroding because some people now prefer
keeping their money at home instead of keeping it in the banks. The fear is
that if this act is not arrested, people might not find it wise to transact
business via our banks.
❖ Fraud damages a bank’s credibility, endangers a bank’s plan and strategies,
reduces operational efficiency, increases public criticisms, loses customer
confidence and considerably damages the bank’s reputation.
❖ Trust and understanding among co-workers, managers and other bank team
members is reduced or weakened by acts of fraud and other financial
malpractices. Trust increases slowly over time through repeated interactions.
However, trust can dissolve in moments from only one bad criminal activity.

Trust may be a key component during a healthy work environment. In banking

institutions where trust work-relationships exist, more work gets done. Team
members work together collaborate. There is job satisfaction, high morale, high job
rotation and low absenteeism because trust buffers high stress levels.

1.1.9 Effect of Bank Fraud on the Customer

❖ Loss of Confidence

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Bank fraud discourages banking habits among the banking public. It raises the
question of how reliable are banks to trust one’s money with them. The ethics of the
banking profession which are honesty, reliability and competence are fading away. It
is disheartening to note that the successful prevention of a particular fraud gives rise
to a more complex and sophiscated one by the perpetrators; and the category of staff
involved are increasingly those of high rank. This brings a great concern to the
society.

❖ Considerable Time and Emotional Losses

Bank customers also experience considerable time and emotional losses which
damage a banker customer relationship because of shattered trust and confidence.
This will, in turn, increase dissatisfaction because of a perceived service failure.
Customers might develop a wrong perception as a result of their negative experience,
that the bank is not safe and is incapable of protecting its clients’ assets.

1.1.10 Effect of Bank Fraud on the Economy

Fraud in the banking sector has considerable influence on the level of

bank performance, which in the long run also impacts negatively on both micro and
macro levels of the economy. The banking industry is the essential prerequisite to a
robust economy; hence, the basic aim of a bank’s management to curtail fraud as well
as the actual losses in the banking sector needs adequate mechanisms to be put in
place. If banking operations are strong, then the economy is better able to withstand
negative social impact as a result of fraud. The banking industry’s importance in any
country stems from its role of financial mobilisation from surplus to deficit unit,
provision of a competent payment system, and facilitating the implementation of
monetary policies.

Banking industry is one of the most important sectors in the economy,

with wide effects on the level and direction of economic growth, transformation; and

16
on such economic variables as the rate of unemployment and inflation which directly
affect the lives of people.

1.1.11 Bank Frauds: Adverse Impact on System and Society

❖ There is difference between wilful defaulter and the defaulter due to

compulsion without much of his mistake. Wilful defaulter may be a criminal
to the society as an entire and will not be spared.

❖ A loan can be recovered by infusing more capital in case a business decision

has gone wrong because that particular firm failed in the market and the loan
has become NPA. But within the case of a loan fraud, it's criminal intention
as in the Nirav Modi case.
❖ These perpetrators of Bank Frauds misuse the banking system and disturb
financial discipline making banking system vulnerable and insecure for
common people dealing with banks
❖ When farmers don't repay their loans, they commit suicide. If the center class
fails to pay their EMI, their homes and cars get confiscated. But the
large defaulters just like the corporate groups take huge loans don't repay and
banks turn them into NPAs or loss assets. This is the loss of huge public
money
❖ These big defaulters run out of country due to timely action and arrest of them.
Although, many of us should are arrested, but not a single person of the
corporate group has been arrested giving wrong signals in the society
❖ The Banking sector is already under stress and is approaching every now and
then to the Government for re-capitalization, but these loan frauds throw cold
water to all the efforts
❖ Banks' financial balance sheets are stressed because of the massive buildup of
NPAs and the frauds are adding to their woes
❖ In December 2017, Ravi Shankar Prasad, the minister for information
technology, said that there were over 25,800 cases of digital fraud in India in
2017.

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 ❖ Financial transactions in the advanced society have become more web based
and electronic exchanges or use of Debit and Credit cards are the go-to mode
of transactions. With this advancement, notorious hackers have found ways to
beat the system and commit theft of e-money and frauds.

1.1.12 OTHER EFFECTS OF BANK FRAUD

❖ Erodes public confidence in banking system.

❖ Diminishing the profitability of bank and thus reduce firm value.
❖ Depletion of stakeholder and bank capital base.
❖ Dismissal and retrenchment of staff.
❖ The trust and understanding among staff is reduced.

1.1.13 THE IMPACT OF RISING BANK FRAUDS ON

PROFITABILITY OF THE BANKING SECTOR.
Fraud results in loss of cash belonging either to the bank or
customers. Such losses could also be absorbed by the profits for the affected trading
period and this, consequently, reduces the amount of profit which might are available
for distribution to shareholders. Losses from fraud, which are absorbed by the equity
capital of the bank, impair the bank’s financial health and constrain its ability to
increase loans and advances for profitable operations. In extreme cases, rampant and
large incidences of fraud could lead on to a bank’s failure. Fraud can increase the
operating expense of a bank due to the added cost of putting in the required
machinery for its detection, prevention and protection of assets. Moreover, devoting
valuable time to safeguarding its asset from fraudulent men distracts management.
This unproductive diversion of resources reduces outputs and low profits which in
turn could retard the expansion of the bank.

1.1.14 HOW CAN YOU PROTECT YOURSELF FROM

“FINANICAL_FRAUDS”?
To minimize chances of financial fraud follow these five tips:

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 1. Limit your exposure:
According to Andrew Stoltmann, a Chicago based securities
analyst, Diversification is the single best and fundamental method for avoiding being
scammed. Starting a business with low investment is always a better option. It is
worth thinking twice before putting more than 5% of one's assets in any single
investment.

2. Background Check:
Never make a decision before checking for past censures,
pending investigations, or lawsuits and verified legitimate registration. For firms and
advisors based in India, check the Securities and Exchange Board of India (SEBI) and
Forward Markets Commission (India) (FMC) for more information as a starting point.
A simple Google check remains the simplest method for performing due diligence on
brokers.

3. Protect Personal Information:

Your fortune is closely linked to your User IDs, passwords and PIN
numbers. This information allows you to access money and assets from your banks
and investments. Keep all such information confidential and safe, update your
passwords and PIN numbers periodically. Never reveal sensitive financial information
to a person or a business you don’t know. Scammers sometimes will email or call
you, claiming to be from a retail business, financial institution or government agency
and will try to trick you into giving them your financial information such as credit
card, bank account number, etc. Remember, your bank, Credit Card Company or any
retail business will never ask for your personal information. If you receive a
suspicious call or email and are concerned about your account, call the company or
bank directly to check on your account status.

4. Protect your PC:

With many transactions now carried out by computer, keeping
software and virus protection up to date is important to reduce the risk of being a

19
victim of cybercrime, such as phishing. With the rise of online banking, trading, and
transactions, the internet becomes a popular ground for fraudsters to trawl for victims.
The Antiphishing Working Group (APWG) provides advice on how to guard against
computer phishing and other forms of computer crime. Here are few tips to help you
ensure your online security:
● Never click on hyperlinks
● Use tough-to-crack passwords
● Never give out social security number via email or on a website.
● Don’t shop with an unfamiliar online retailer.
● Don’t download software from pop-up windows.
● Think carefully before you click on a link or download an attachment.

5. Monitor your Investments:

Like most things that grow, investments need regular care and attention, especially
while starting a business. Achieving your goals means keeping a watchful eye on your
Funds and doing what you'll to stay them on target. Check your monthly statements
carefully, verify any withdrawals made and look for excessive or unauthorized trading
in your funds.

1.1.15 PREVENTION AND CONTROL

Fraud prevention and control is a procedure of delivering sound ethical

culture and effective internal control systems which may reduce the opportunity for
fraud to take place in a financial institution. The auditor shoulders the responsibility
of prevention and control and detection of fraud. Thus all internal control measures
have become preventive and protective of the banks financial resources. Fraud
prevention and internal control system impact on banks performance and the
determinants that can be effective in the management and control of financial fraud.

20
1.1.16 PREVENTION OF BANK FRAUDS

• Most of the big corporates who have committed fraud to the tune of thousands
of crores are shying away from coming back and to repay the money as they
are aware that the punishment by law will still be there even if they repay.
Indian Law or the Indian Government has no way to award softer punishment
even if these defaulters repay the amount in full. Accordingly, it is more
important to prevent a bank fraud than to run after it when it is done.
• With the existing rules and laid down procedures most of banking frauds can
be prevented, in case they are meticulously followed and bank staff is not
pressurised to sanction the loan.
• Former RBI governor Raghuram Rajan writes in his book, I Do What I Do:
“Today, a variety of authorities…monitor the performance of public sector
banks… It is important that we streamline and reduce the overlaps between the
jurisdictions of the authorities, and specify clear triggers or situations where
one authority’s oversight is invoked.”
• RBI is tasked with detecting infirmities, but has no authority to enforce its
own orders, administer remedial measures or even deliver swift punitive
action. The central investigative agencies are tasked with following up on
investigations and pursuing legal recourse. The political pulls and pressures on
these agencies, as well as the Indian legal system’s long-drawn processes,
provides swindlers with enough escape routes and isn’t a deterrent. It should
be looked into.
• As a cautious bank customer, you should register your working mobile
number with your bank so as to receive SMS/Email alerts regarding
transactions.
• Check the emails and messages received from the bank, regularly. In case you
find any suspicious or unapproved transaction that you can't place, consult and
report back to the bank, immediately.
• Never share your banking User Id, Password or OTP (One Time Password)
with anyone. No bank official will ever call you for these details.

21
 • Never share your Debit Card/ Credit Card Number or the numbers displayed at
their back with anyone as you may end up losing money and be held
responsible at the same time.

1.1.17 STEPS, BANKS SHOULD TAKE

● Banks should review their systems and procedures regularly. Ethical banking
practices should be preferred. Disclosures to RBI, SEBI and other regulators
should be made with consistent periodicity.
● SWIFT-CBS linking must be made mandatory for all LoUs. Confirmation
from lending foreign branches must be finished each of the LoUs.
● All internal and external audits must be completed on time at branch level.
The audit reports should be shared with the government's auditors and
examined by the RBI. In the PNB fraud case, the bank has told the finance
ministry that the last audit by RBI was wiped out March 2009.
● Only well trained bank staff suitable for the role should be posted undertaken
for the skilled job.
● Use of technology for preventing fraud should be encouraged within banking
ecosystem.
● New technology like blockchain can be used to record all banking
transactions.
● Once a fraud is detected, it should be immediately flagged by the bank and
concerned agencies roped in for probe.

1.1.18 STEPS TAKEN BY GOVERNMENT, RBI AND BANKS

● Reserve Bank of India says "The reported fraud cases are processed and action
is taken according to the facts and circumstances of individual cases." But this
is what is being done when the thousands of crores of Rupees have been
siphoned off with very low chances of recovery

22
 ● RBI has constituted an expert panel to examine what is ailing banking
operations resulting in increasing cases of big frauds. The panel has been
tasked to recommend measures to fix the systemic loopholes. The Centre is
additionally analysing the risk management framework for banking sector.
● As per its notification in July 2017, The Reserve Bank of India has tried to
limit customers’ liability when faced with fraudulent online transactions by
giving them a window of three days to report the fraud. However, this doesn’t
reach to cases where the customer knowingly gave their payment information
to a third party.
● Indian police is also being trained to tackle cybercrime. The government of
Karnataka, which instituted a cybercrime cell in 2003, plans to enroll 1000
policemen in cybercrime training programmes. In addition, the police units of
Maharashtra and Uttar Pradesh are collaborating with data security and IT
experts to improve their cybercrime investigation skills.

1.1.19 EXAMPLES
PANJAB NATIONAL BANK FRAUD (NIRAV MODI)
The Punjab National Bank Fraud Case relates to fraudulent letter of
undertaking worth Rs 11,356.84 crore (US$ 1.4 billion) issued by the Punjab National
Bank at its Brady House branch in Fort, Mumbai; making Punjab National Bank
liable for the amount. The fraud was allegedly organized by jeweller and
designer Nirav Modi.

Modi criminal is on the Interpol's wanted list for criminal conspiracy,

breach of trust, cheating and dishonesty together with delivery of
property, corruption, money laundering since February 2018.

The bank initially said that two of its employees at the branch were
involved within the scam, as the bank's core banking system was bypassed when the
corrupt employees issued LOUs to overseas branches of other Indian banks,
including Allahabad Bank, Axis Bank, and Union Bank of India, using the
international financial communication system, SWIFT. The transactions were noticed
by a new employee of the bank. The bank then complained to the CBI, who is

23
currently investigating the scam apart from ED and [[Reserve bank of India]]. On a
later date, CBI named key officers Usha Ananthasubramanian, former CEO of PNB,
executive directors KV Brahmaji Rao and Sanjiv Sharan in a chargesheet holding
them responsible for failure to implement several circular and caution notices issued
by the RBI regarding the reconciliation of SWIFT messages and core banking
systems.

Punjab National Bank (PNB) alleges associates of three firms -

Diamond R US, M/s Solar Exports and M/s Stellar Diamonds- approached PNB on 16
January 2018, with a request for LoUs to make payment to its overseas suppliers. The
bank demanded at least a 100 percent cash margin for issuing LoUs, but the firms
contested that they had received LoUs without any such guarantee in the past. Branch
records did not show any such facility having been granted to the firms, PNB
suspected fraud and began digging into transaction history. On 29 January 2018, PNB
filed a complaint with the CBI, wherein it was alleged that Nirav, Ami Modi, Nishal
Modi and Mehul Choksi, all partners of M/s Diamond R US, M/s Solar Exports and
M/s Stellar Diamonds, in collusion with two bank officials committed the offence of
cheating against PNB and caused a wrongful loss. The PNB official in his complaint
informed the agency that at the Bank’s branch office at Brady House in Fort, Mumbai,
two of its employees, Gokulnath Shetty, retired Deputy Manager of PNB and another
bank official ManojKharat, issued fraudulent LoUs to Hong Kong based creditors on
behalf of three firms associated with Nirav Modi and the Gitanjali Group. “The public
servants committed abuse of official position to cause pecuniary advantage to
Diamonds R US, Solar Exports and Stellar Diamonds and wrongful loss of Rs 280.70
crore to PNB during 2017,” said the first information report (FIR) filed by CBI.

As of 18 May 2018, the scam has ballooned Rs14,356.84

crore (US$2.1 billion) and Nirav Modi is said to be hiding in
London, allegedly travelling on a fake passport.

On 13 June 2018, the CBI approached the Interpol to issue a red corner
notice (RCN) against Nirav Modi's brother Nishal and one of his executives in
connection with its probe into the Punjab National Bank (PNB) fraud. The CBI sent a
request to the Interpol to issue a RCN against Nirav Modi and his uncle Mehul Choksi
of the Gitanjali Group.

24
 On 20 August 2018, former MD and CEO of Allahabad Bank, Usha
Ananthasubramanian was granted bail on a surety bond of Rs 1 lakhs by Special CBI
court in Mumbai. A week earlier, the government had dismissed Usha on the last day
of her work. Ananthasubramanian was MD of Punjab National Bank between August
2015 and May 2017 and had also served as its executive director. She was dismissed
with immediate effect. On 7 September 2018 one of the accused of the Punjab
National Bank (PNB) fraud, Nitin Shahi filed an application in a special Central
Bureau of Investigation (CBI) court to book PNB as an additional accused in the case.
The hearing on the matter is scheduled to be held on September 21. The application
filed by Shahi stated that, although the PNB has not been charge sheeted on the fraud
case, there are materials available for prima facie proceeding against the bank. The
CBI registered a disproportionate assets case against a retired deputy manager of
Punjab National Bank, Gokulnath Shetty, a key accused, for allegedly amassing
wealth 200 per cent more than his known sources of income.

VIJAY MALLYA FRAUD

Vijay Mallya, the “king of good times”, a beer baron has always
been in news. All thanks to his overthe-top, extravagant lifestyle, Mallya and his
companies have been embroiled in financial scandals, and controversies since 2012.
In November 2015, it came to limelight that Mallya owed at least $1.35 billion to the
banks in India. In March 2016, a consortium of banks approached the Supreme Court
of India to stop Mallya from going abroad due to pending money his companies owed
them. Courts then issued non-bailable arrest warrants against the businessman.
Mallya’s Kingfisher Airlines had borrowed Rs. 9432 crore from 13 banks till
February 2018. The State Bank of India was the biggest lender with Rs. 1600 crore,
followed by the PNB Rs. 800 crore, IDBI Rs. 650 crore and Bank of Baroda Rs. 550
crore. Mallya left India on March 2, 2016, and is hiding in London. The government
of India is fighting for his extradition till date. Mallya’s case is unique in the Indian
banking industry in many ways. It is both shocking and demeaning that an individual
has successfully managed to take some 17 banks for a ride. Banks acting as charity

25
houses for lending loans to Mallya calls people to question the credibility of
authorities involved in credit appraisal process. There is finally light at the end of the
tunnel as the banking system has finally decided to lay their hands on “rich and
powerful”.

PMC BANK FRAUD

Indian banking system is passing through a tough time. The banking
sector has huge Non Performing Assets (NPA).In this tough time another bank fraud
came in the light in the name of PMC bank .The main reason (crucx) of this bank
fraud is that the higher management of the PMC bank has given huge loan to the
Housing Development and Infrastructure Ltd (HDIL) and its group entities. This fraud
case is related to transfer of 70% of the total credit facilities of the total credit
facilities of the PMC bank to HDIL and its associated companies. The total HDIL and
its associated companies. The total amount of bank fraud was Rs 4355 crore .Now the
total NPV of the bank has grown to 73%.

The PMC bank allegedly favoured to the promoters of Housing

Development and Infrastructure Ltd (HDIL) and allowed them to operate password
protected “masked accounts”.

This bank fraud case is busted by a bunch of women employees of the

credit department of the PMC bank. These employees told to the RBI that they were
aware of the ghost accounts. When this case came in the light; then customers of the
PMC bank rushed to the PMC bank to withdraw their hard earned money but they
were refused to give their deposited money and withdrawal limit is Rs 10,000 per
month from their account set by the bank.

ROTOMAC PEN FRAUD

26
 The promoter of Rotomac Pen, Vikram Kothari, allegedly
fraudulently cheated Rs. 3695 crore with seven banks. Kothari has misappropriated
loans worth Rs. 2919 crore from seven banks and the total outstanding amount,
including interest on him, is Rs. 3695 crore. The CBI has arrested managing director
of Rotomac Global Pvt. Ltd., Vikram Kothari [9]. Vikram Kothari, allegedly
fraudulently cheated Rs. 3695 crore with seven banks. Rotomac Global Private
Limited cheated a consortium of banks to the tune of Rs. 36.95 billion (Rs. 3695
crore), including interest by siphoning off loans sanctioned to the company for
procurement of wheat and other goods for export. The CBI registered a case after
receiving a complaint from Bank of Baroda against Kanpur-based Rotomac Global
Private Limited, its director Vikram Kothari, his wife Sadhana Kothari, and son Rahul
Kothari and unidentified bank officials. Initially, the alleged scam was estimated to be
of Rs. 8 billion (Rs. 800 crore) but after the CBI started to probe into the accounts of
the company, it was found that the company had allegedly taken loans from Bank of
India, Bank of Maharashtra, Indian Overseas Bank, Union Bank of India, Allahabad
Bank, and Oriental Bank of Commerce. Seven banks acted as the consortium. These
include:

1. Bank of India – Rs. 7.55 billion (Rs. 754.77 crore)

2. Bank of Baroda – Rs. 4.57 billion (Rs. 456.63 crore)
3. Indian Overseas Bank – Rs. 7.71 billion (Rs. 771.07 crore)
4. Union Bank of India – Rs. 4.59 billion (Rs. 458.95 crore)
5. Allahabad Bank – Rs. 3.31 billion (Rs. 330.68 crore)
6. Bank of Maharashtra – Rs. 489 million (Rs. 49.82 crore)
7. Oriental Bank of Commerce – Rs. 974 million (Rs. 97.47 crore)

In Rotomac pen scam, the principal loan is about Rs. 824 crore,
adding the interest due would indicate a loss of more than Rs. 1000 crore to the banks.
The main accused in this scam is Kanishka Gold Pvt. Ltd. This company did not pay a
loan of Rs. 824 crore, which has been converted into “NPA”. The CBI has registered
a case against Chennaibased company Kanishka Gold and ED has started
investigating the fraud. The director of this company Bhupendra Kumar Jain and his
wife Neeta Jain have fled the country.

27
These banks have lent money to the Kanishka Gold Pvt ltd

1. State Bank of India: Rs. 240 crore

2. Punjab National Bank (PNB): Rs. 128 crore

3. Bank of India: 46 crores

4. IDBI:-. 49 crores

5. Syndicate Bank: - 54 crores

6. Union Bank: - 53 crore

7. UCO Bank: - 45 crores

8. Central Bank of India: - 22 crores

Simbhaoli Sugar Mills Bank Scam

CBI has registered another bank fraud against one of India's largest sugar mills-
Simbhaoli Sugars Ltd, amounting to Rs 200 crore. There are 10 people have been
booked, including the chairman of Simbhaoli Sugar Mills Limited Gurmeet Singh
Mann, Deputy Managing Director Gurpal Singh and CEO GSC Rao.
According to an estimate, in the last three years, the bank scams of around Rs. 23,000
crore have taken place in the country, due to which the country's banking system has
suffered a lot. This is why the total NPA of the country's banks has crossed the mark
of 10 lac cr in June 2018. Now it is the need of the hour that the government should
take some concrete actions to check the Crony capitalism and the intervention of the
politicians in the functioning of the banks in India.

1.1.20 IMPACT OF FRAUD ON ECONOMY

28
 ● The negative impacts are going to be less on strong domestic players.
● In the wake of these scandals, banks in India are becoming more conscious
and suspicious of their clients, specifically businessmen.
● Nirav Modi’s fraud case has not only affected his company and the Punjab
National Bank but in fact has impacted the jewelry and banking industry as a
whole.
● Banks in India are shifting focus towards compliance and corporate sector.
● Diamonds merchants in India now fear that diamond cutting and polishing
business will now shift from India to Belgium and Israel.
● The real-estate market in India is a mess.
● The more reliable banks may see a rush of deposits away from second-tier
lenders with 9 trillion rupees in deposits.

● The fraud at PMC Bank came to light in September last year after the Reserve
Bank of India discovered that the bank had allegedly created fictitious
accounts to hide over Rs 6,700 crore in loans extended to the almost-bankrupt
Housing Development and Infrastructure Limited (HDIL).

● The recent market volatility along with the news of 2 back to back bank frauds
has seen the banking sector stocks in particular and the market index, in
general, has led to a massive wipe-off of the market capitalization.
● Due to fraud NPA is continuous rise in banks

1.2 STATEMENT OF PROBLEM AND NEED OF STUDY

29
 Banks are the engines that drive the operations in the financial
sector, money markets and growth of an economy. The banks hold a great
responsibility towards the society. The larger society greater Accountability, Fairness,
Transparency and Effective Intermediation from bank.

With the rapidly growing banking industry in India, frauds in banks

are also increasing very fast, and fraudsters have started using innovative method.
Many banks today have suffered a great financial loss in the end of numerous
financial transaction and unsecure loan. Frauds have been on the increase in recent
years. Statement of problem is causes of bank fraud, impact of fraud on environment
(banking sector, customers, economy, and society), leads to fraud then continuous rise
of NPAs in banks, due to rise fraud impact on profitability of banking sector.

There is need to study fraud prevention and control in banking system.

How to fraud prevent in banking sector and how can internal control is maintain in
banking sector.

30
1.3 RATIONAL OF STUDY

Humans

The study will be useful to the general public because the banking industry
touches the life of everyone in an economy. Banks all over the world have contributed
immensely to the economic growth and development of nations. As such, problem
such as fraud which can hinder the smooth operation of the banking industry should
view with all seriousness in other not to intercept or destroy the rate of development.

Banking Sector

The study will be useful to the banking sector. Frauds have been on the
increase in recent years. Therefore it is need to study fraud prevention and control in
banks.

Society

The study will be useful to the society because it is improved standard of

living and also helpful to overcome loss due to fraud.

31
CHAPTER 2: RESEARCH METHODOLOGY

2.1 OBJECTIVES

● To study the causes of bank fraud.

● To study the impact of fraud on banking environment.
● To examine the impact of frauds in the continuous rise of NPAs in the Indian
banking sector.
● To analyse the impact of rising bank frauds on profitability of the banking
sector in India.
● To understand the prevention and control of fraud in banking system.

32
2.2 HYPOTHESIS

Ho = Null (negative statement)

H1 = Alternative (positive statement)

❖ Impact of frauds on rising Non Performing Assets in the Indian banking

sector.

Ho: Frauds do not have a significant impact on Non-Performing Assets in the

Indian banking sector.

H1: Frauds have a significant impact on Non-Performing Assets in the Indian

banking sector.

❖ Impact of frauds on profitability of the Indian banking sector.

H0: Frauds do not have a significant impact on profitability of the Indian

banking sector.

H1: Frauds have a significant impact on profitability of the Indian banking

sector

❖ The prevention and control of frauds in banking system.

H0: The frauds don’t have significant prevention and control in banking
system.

H1: The frauds have significant prevention and control in banking system.

33
2.3 SCOPE OF THE STUDY

The research will be focused on the “Fraud prevention and control in

banking system or sector”. The total number of respondents will be 100. Fraud has
been on the increase in recent times in the bank. The purpose of study is how to
overcome bank fraud. What should take prevention to reduce the fraud?. How to
control bank fraud?. Since it would be too much of a burden to investigate, so the
researcher reduces the scope and collect responses only from Kalyan of Thane
District.

2.4 LIMITATION

❖ Finance one of the major constraints limited the work.

❖ Time constraints are the factor that limited this research work.
❖ The unco-operative attitude of staff the selected banks become
problematic.
❖ The poor response of staff in banking staff and fear of victimization.

34
2.5 RESEARCH METHODOLOGY

Research methodology is the specific procedures or techniques used to

identify, select, process and analyze information about a topic.
The research paper on the title “To study the fraud prevention and control in
the banking system ” is done on the basis of Descriptive Method.
This study is based on primary and secondary sources. A primary source is
anything that I give you direct evidence about the people, events or phenomena that
you are researching. Primary sources provide raw information and first-hand
evidence. A secondary source provides second-hand information and commentary
from other researchers.
In this research, as a part of study is primary source i.e. questionnaire-based
survey, this questionnaire is considering by objective and used closed ended
questions. Second part of study is secondary sources i.e. information collected from
internet, various websites, research paper from Google Scholar, etc.
Sampling unit has been individual respondent. Sampling size is limited it is
100 respondents only. Sampling method it has been used simple random sampling
method. The samples are collected from the Kalyan of Thane District from
respondents.

35
CHAPTER 3: REVIEW OF LITERATURE

3.1 REVIEW OF LITERATURE

1. However, Internal and External factor is a problem in the activities of banking

industry as they contribute to bank fraud. Internal factor which motivates involvement
in bank fraud include inadequate staffing, poor internal control, lack of proper
training. External factors are people who often trace to the immediate and remote
environment of the bank these factors are manifest in the following manner desire to
rich quick, competition among staff, job insecurity, and societal expectations.

([Link], [Link], [Link]., 2017)

2. From the Indian environment believes the reason for the rise in fraud profile in the
banking industry is because the procedures jointly instituted by the Banks and the
Reserve Bank were not fully implemented. The paper cites overburdened staff, lack
of training and competition as other causes of the fraud.

(Khanna,A; Arora,B., 2009)

3. The frauds may be primarily due to lack of adequate supervision of top

management, faulty incentive mechanism in place for employees; collusion between
the staff, corporate borrowers and third party agencies; weak regulatory system; lack
of appropriate tools and technologies in place to detect early warning signals of a
fraud; lack of awareness of bank employees and customers; and lack of coordination
among different bank across India and abroad. The delays in legal procedures for
36
reporting, and various loopholes in system have been considered some of the major
reasons of fraud and NPVs.

(Charan Singh, Deepanshu Pattanayak, 2016)

4. The impact of fraud on entities like banks, which are engaged in financial activities,
is more significant as their operations involve intermediation of fraud. The economic
cost of frauds is often huge in terms of likely disruption within the working of the
markets, financial institutions, and therefore the payment system. Besides, frauds can
have a potentially debilitating effect on confidence in the banking system and may
damage the integrity and stability of the economy. It can bring down banks,
undermine the central bank’s supervisory role and even create social unrest,
discontent and political upheavals. The vulnerability of banks to fraud has been
heightened by technological advancements in recent times.

(Chakrabarty, K. C., 2013)

5. In recent years, instances of banking frauds reported in India are on a steady rise.
Even though in India, banking frauds have frequently been treated as one of the costs
of transacting business, after liberalization their frequency, complexity and inherent
costs of frauds have swelled manifold resulting in a very grave causes of alarm for
regulators, due to its harsh impact on the banks profitability and consequently on the
Indian economy.

(Ainsley Granville Andre Jorge Bernard, 2019)

6. It is evident that post liberalization era has showered new colours of growth upon
the Indian banking sector but simultaneously it has also posed some serious
challenges; one of them being rise in frauds and NPAs. This unhealthy development
of rising fraudulent activities afflicting the banking sector generates not only losses
for the banks involved but also impinges their credibility adversely, frauds and
fraudulent activities wreak severe financial dilemmas on banks and their clients, as

37
well as cause a significant reduction in the quantum of money accessible for
economic development. While it may not probable for banks to conduct their
operations in a zero fraud milieu, proactive measures, such as conduct of risk
assessment of policies and procedures can aid banks to circumvent their risk of
contingent losses resulting from frauds. The data analysis technology can be
leveraged by banks to detect frauds at the incipient stage itself and reduce their loss
causing impact significantly.

(Brahma Edwin Barreto, 2019)

7. The delays in legal procedures for reporting, and various loopholes in the system
have been considered some of the major reasons of frauds. The growth in number of
frauds over the years is marginal whereas the growth in value of frauds has shown
tremendous increase indicating that frauds involving larger amounts have been
happening in recent years. Growth of advances supported by a corresponding severely
affected the profitability of the banking sector in India. Stringent action by authorities
along with finding new means of fraud prevention and reduction is the only way
forward to safeguard the credibility of Indian banks and give a face-lift to the banking
sector of the country.

The amount involved in frauds has risen drastically in comparison to the increase in
number of frauds. Majority of frauds in the banking sector relate to advances which
cause of worry for banks in India. The Gross NPAs to Gross Advances Ratio has
shown a rising trend over the years. Assets quality of industry related advances
followed by advances related to the service sector are a matter of concern for the
banking sector in India. Therefore frauds have a significant impact on Non-
Performing Assets in the Indian banking sector. Profitability of banks is on a steady
decline which needs to be an eye opener as it poses a threat to the economy. Therefore
frauds have a significant impact on profitability of the Indian banking sector.

(Ainsley Granville Andre Jorege Bernard, Brahma Edwin Barreto, Rodney D'Silva,
2019)

38
8. A fraud victim may also impact customers’ perception of feeling secure and
protected at their bank. Accordingly, fraud may damages the bank-customer
relationship because of shattered trust and confidence as well as increased
dissatisfaction be cause of a perceived service failure.

(Krummecks, Varela-Neira [Link] Casilles, [Link] Iglesias, V., 2010)

9. The most positively significant and impactful variable is cash as used in the
banking system, while the most negatively significantly is technology use in the
system. It is safer to encourage the use of technology to reduce cash in the system
while efforts are made to increase the quality of staff with good pay. These two efforts
would reduce fraud in the very long term in the banking system in the country. A
safer conclusion would be then the hiring of educated and more qualified people in
the system would definitely reduce fraud.

Since technological fraud is increasing, the use of cash in rendering service needs to
be reduced by the Central Bank of Nigeria by intensifying the cashless policy begun
some years back. This policy as matter of fact should be taken to a higher level with
the financial system.

(Kehinde Adekunle Adetiloye, Felicia Omowanmi Olokoyo, Joseph Niyan Taiwo,

2016)

10. To fight phishing ,institutions must adopted a multi-pronged approach with

minimum four components which are usage and development of new technologies to
counter fraud, educating customers with riders everywhere, helping law reinforcement
agency by way of providing information of the incidents, proper and regular
stringent audit of online systems.

(N.P. Singh, 2007)

39
11. This research paper proposes a secure layer of Authentication i.e. One Time
Password (OTP) approaches for protection from advanced persistent threats or fraud.
Simple ATM Card and PIN [Link] approaches are not sufficient to deal with the
kind of advanced persistent threats or fraud. It is necessary to include OTP as it
resembles a unique through process about secure electronic transaction of ATM
security, and builds trust and confidence of users’ toward bank.

(Shweta Sankhwar, Dhirendra Pandey, 2016)

12. If banks want to combat with financial fraud and the financial discrepancies, they
need more than an accountant. Forensic accounting is the technique to fight with
financial frauds. Forensic accounting is combination of Accounting, Auditing, and
Investigation Skill. But still forensic accounting is in its initial stage (Implementation
Stage). As per the report of India Forensic Report, only 6% composition of forensic
accountant is found in banks of India. So the adoption of the forensic accounting is an
effective measure for banks to combat financial fraud.

(Anju Rohilla, Dr. Ipshita Bansal, 2017)

13. The best way of preventing fraud was to understand why it happened. Fraudster
generally identifies loopholes in control procedures and then assess whether their
potential reward will outweigh the penalties should they be caught. A regular control
is most effective for prevention of fraud and normally requires little management time
or effort. Prevention of fraud starts with identification of weakness in current systems
of the organization. Next the organization must improve those systems with new or
better controls. The introduction and enforcement on controls will reduce the
opportunities for frauds. The control warns potential fraudster that the management is
actively monitoring the business and in turns deters frauds. Education, training and
awareness programmes are informal intervention measures that should be
implemented to prevent fraud.

(newsletter, 2011)

40
14. In order to solve the problem of frauds it becomes imperative to train staff in
prevention of bank frauds. It is also important to provide adequate staff so that
guidelines and instructions lay down by the RBI can be followed strictly. The
communication process between manager and staff should be improved so that proper
information about fraud is disseminated. The attitude towards RBI procedures should
be improved through proper communication. The bank employee should be educated
as to why a particular procedure is followed and what can be the implication if it is
not adhered to strictly. The personal life style of the employee should also be checked
from time to time in order to see any discrepancy between his income and expenses.
Signature is always vulnerable to forgery and thumb impression should be
introduced along with signature.

(Asha Khanna, Bindu Arora, 2009)

15. Internal control system has four broad objectives: to safeguard assets of the firm,
to ensure the accuracy and reliability of accounting records and information, to
promote efficiency in firm’s operations and to measure compliance with management
prescribed policies and procedures. The effectiveness of internal controls depends
largely on management’s integrity.

(Haugen, S. , Selin J.R., 2011)

16. Fraud detection or prevention is a function that should be system-wide, but mostly
in the realm of internal audit group. Fraud should not go through and be undetected in
any accounting year where an effective internal control and audit process are in
place.

(Deloitte, 2015)

17. From the discussion, the researcher presumes that banks in Nigeria have adopted
various forensic accounting practices which include litigation support, fraud
investigation and expert consultancy. The study further more ascertains that there is a

41
positive impact of forensic accounting on fraud prevention and detection. A firm
wishing to grow with minimized level of fraud must therefore put into place sufficient
resources to be able to properly practice forensic accounting in its different
department. Just as money deposit banks use other means of reducing the occurrence
of fraud, forensic accounting can provide confidence in financial statement as it has a
positive impact on fraud prevention and detection. Among legal strategies utilized in
different organizations, personal responsibility has emerged as one of the most
preferred strategies of curbing fraud; fraudulent activities must be monitored,
prevented and detected in the banking sector with forensic accounting being a tool
that can be used to aid this.

(Ogundana Oyebisi, Okere Wisdom, Ogunleye Olusoga and Oladapa Ifeoluwa, 2018)

18. E-banking fraud detection and prevention mechanisms includes technology, fraud
monitoring and internal controls, customer complaints and whistle- blowing,
surveillance mechanisms, staff-customer awareness and education, legal and
judicial controls, institutional and organizational synergy mechanisms, fraud
assessment, real-time monitoring.

(Oluwalami Matthew Fadyo, 2018)

19. The ATM Electronic transaction is playing very persistent and pervasive role.
Basically the conventional method of authentication and authorization is a based on
possession of credit/ debit card details and a security number i.e. PIN which is not
reliable. In this research paper, a greater demand for fast and accurate user
identification, authentication, and authorization is considered. Therefore, a secure
layer of Electronic Transaction mechanism is proposed to developed cardholder
identification, authentication, authorization and security controls, including ATM/
EDC Digital swapping keypad and ATM/ EDC censored keypad shield cover. Hence,
there will be delicate level of trust and confidence on electronic transaction ATM.

(Dhirendra Pandey, Shweta Sankhwar, 2016)

42
20. There are various methods that a bank can use to combat phishing attack. These
methods are known as phishing attack countermeasures, which include e-mail and
web page personalization, protection software, the use of two-factor authentication,
and increasing customer awareness. Some of the methods that this section
recommends to reduce the risk of phishing attacks will prevent the users from being
fooled by online phishing attackers. Phishing attacks can be combated if both banks
and users adhere to these countermeasures.

(Aluseen O. Alsayed, Anwar L. Bilgram.i, 2017)

CHAPTER 4: DATA ANLYSIS, INTERPRETATION AND

PRESENTATION

GENDER

43
Explanation:

According to the survey, the researcher has found that 100 responses out
of 54% responses are collected from female respondents whereas 46% responses are
collected from male respondents.

AGE

Explanation:

According to the survey, the researcher has found that majority of the
respondents were between the age 20-30 i.e.54%. The 20% respondents were in the
30-40 age group. The 14% respondents were in the 40-50 age group. The 6%

44
respondents were in the 50 and above age group. The 6% respondents were in the
Below 20 age group.

BANKS

Explanation:

According to the survey, the researcher has found that 38% respondents
which is Public Sector Bank whereas 32% respondents which is Co-operative Bank
and 30% respondents which is Private Sector Bank.

45
Lack of training leads to bank fraud

Explanation:

According to the survey, the researcher has found that lack of training
leads to fraud in banking sector, majority of the respondents i.e. 56% agree with the

46
statement whereas 16% respondents neutral and 16% respondents disagree with the
statement and 7% respondents highly agree with the statement whereas 5%
respondents highly disagree with the statement.

Lack of adequate supervision of top management can cause fraud

Explanation:

47
 According to the survey, the researcher has found that lack of adequate
supervision of top management can cause to fraud, majority of the respondents i.e.
45% respondents agree with the statement whereas 30% respondents neutral with the
statement and 14% respondents highly agree with the statement whereas 11%
respondents disagree with the statement.

Bank fraud has been heightened by technological advancement in

recent time

Explanation:

48
 According to survey, the researcher has found that bank fraud has been
heightened by technological advancements in recent times, majority of respondents
i.e. 55% respondents are agree with the statement whereas 24% respondents are
highly Agree with the statement and 9% respondents neutral and 8% respondents
Disagree with the statement whereas 4% respondents are Highly Disagree with the
statement.

Financial fraud impact on profitability of banks

Explanation:

49
 According to the survey , the researcher has found that financial fraud
impact on profitability of banks, majority of respondents i.e. 51% respondents Agree
with the statement whereas 32% respondents Highly Agree with the statement and 7%
respondents Neutral and 6% respondents Disagree with the statement whereas 4%
respondents Highly Disagree with the statement.

Integrity and stability of the economy is affected by financial bank

fraud

Explanation:
50
 According to the survey, the researcher has found that integrity and
stability of the economy is affected by financial bank fraud, majority of respondents
i.e. 56% respondents Agree with the statement whereas 21% respondents Highly
Agree with the statement and 17% respondents Neutral with the statement whereas
6% respondents Disagree with the statement.

Fraud has damaged the trust and confidence of customer about the
bank

Explanation:

51
 According to the survey, the researcher has found that fraud has
damaged the trust and confidence of customer about the bank, majority of respondents
i.e. 42% respondents Agree with the statement whereas 39% respondents Highly
Agree with the statement and 8% respondents Neutral and 7% respondents Disagree
with the statement whereas 4% respondents Highly Disagree with the statement.

Fraud in the banking sector is reason of continuous rise of NPAs

Explanation:

52
 According to the survey, the researcher has found that fraud in the
banking sector is reason of continuous rise of NPAs, majority of the respondents i.e.
45% respondents are Agree with the statement whereas 24% respondents Neutral with
the statement and 15% respondents Disagree with the statement whereas 8%
respondents Highly Agree and Highly Disagree with the statement.

Hiring of educated and more qualified people in the bank would

reduce the fraud

53
Explanation:

According to the survey, the researcher has found that hiring of educated
and more qualified people in the bank would reduce the fraud, majority of the
respondents i.e. 40% respondents are Agree with the statement whereas 22% Neutral
with the statement and 18% Highly Agree with the statement whereas 14% Disagree
with the statement and 6% Highly Disagree with the statement.

Proper and regular audit can control the banking fraud

54
Explanation:

According to the survey, the researcher has found that proper and regular audit can
control the banking fraud, majority of the respondents i.e. 50% respondents are Agree
with the statement whereas 34% respondents Highly Agree with the statement and 9%
respondents Neutral with the statement whereas 7% Disagree with the statement.

Forensic accounting can be effective measure for bank to overcome

from financial fraud

55
Explanation:

According to the survey, the researcher has found that forensic

accounting can be effective measure for bank to overcome from financial fraud,
majority of the respondents i.e. 51% respondents Agree with the statement whereas
28% respondents Neutral with the statement and 11% respondents Highly Agree with
the statement whereas 6% respondents Disagree and 4% Highly Disagree with the
statement.

Education, training and awareness programmes can be the measures

that should be implemented to prevent fraud

56
Explanation:

According to the survey, the researcher has found that education, training
and awareness programmes can be the measures that should be implemented to
prevent fraud, majority of the respondents i.e. 53% respondents Agree with the
statement whereas 36% respondents Highly Agree with the statement and 7% Neutral
with the statement whereas 4% respondents Disagree with the statement.

Charging of penalties to the fraudulent people can act as a solution

for fraud in the banking sector

57
Explanation:

According to the survey, the researcher has found that charging of

penalties to the fraudulent people can act as a solution for fraud in the banking sector,
majority of the respondents i.e. 43% respondents Agree with the statement whereas
27% respondents Neutral with the statement and 13% respondents Highly Agree with
the statement and 12% respondents Disagree and 5% Highly Disagree with the
statement.

OTP can be a solution to the ATM fraud

58
Explanation:

According to the survey, the researcher has found that OTP can be a
solution to the ATM fraud, majority of the respondents i.e. 53% respondents Agree
with the statement whereas 22% respondents Highly Agree with the statement
whereas 10% respondents Neutral and 10% respondents Disagree with the statement
whereas 5% respondents Highly Agree with the statement.

Introduction of thumb impression along with signature can prevent

the banking fraud

59
Explanation:

According to the survey, the researcher has found that introduction of

thumb impression along with signature can prevent the banking fraud, majority of the
respondents i.e. 50% respondents Agree with the statement whereas 31% respondents
Highly Agree with the statement and 8% respondents Neutral with the statement
whereas 7% respondents Disagree and 4% respondents Highly Disagree with the
statement.

Maintain the accuracy and reliability in accounting records can

control the banking fraud

60
Explanation:

According to the survey, the researcher has found that maintain the
accuracy and reliability in accountings records can control the banking fraud, majority
of the respondents i.e. 53% respondents Agree with the statement whereas 28%
respondents Highly Agree with the statement and 13% respondents Neutral with the
statement whereas 6% respondents Disagree with the statement.

Descriptive statistics

Descriptive statistics are used to describe the basic features of the data in a
study. They provide simple summaries about sample and the measures. The following
table provides the descriptive statistics based on the data collected

61
 PARTICULAES GENDER AGE BANKS V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 V13 V14 V15
Mean 1.54 2.6 2.08 3.44 3.62 3.87 4.01 3.92 4.05 3.3 3.5 4.11 3.59 4.21 3.47 3.77 3.97 4.03
Median 2 2 2 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4
Mode 2 2 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4
Standard Deviation 0.5 1 0.82 1 0.86 1 0.99 0.78 1.05 1.07 1.12 0.83 0.91 0.74 1.02 1.06 1.01 0.8
Sample Variance 0.25 1.01 0.68 1.01 0.74 1 0.99 0.61 1.11 1.16 1.26 0.7 0.83 0.55 1.05 1.12 1.03 0.65
Kurtosis -2.01 0.05 -1.51 -0.04 -0.52 1.31 1.89 0.32 1.29 -0.35 -0.39 0.65 1.05 1.3 -0.05 0.67 1.46 0.43
Skewness -0.16 0.87 -0.15 -0.85 -0.23 -1.2 -1.38 -0.61 -1.3 -0.62 -0.56 -0.94 -0.88 -0.96 -0.59 -1.07 -1.28 -0.75
Range 1 4 2 4 3 4 4 3 4 4 4 3 4 3 4 4 4 3
Minimum 1 1 1 1 2 1 1 2 1 1 1 2 1 2 1 1 1 2
Maximum 2 5 3 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Sum 154 260 208 344 362 387 401 392 405 330 350 411 359 421 347 377 397 403
Count 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Confidence Level(95.0%) 0.09 0.19 0.16 0.2 0.17 0.19 0.19 0.15 0.2 0.21 0.22 0.16 0.18 0.14 0.2 0.21 0.2 0.16
(Source: Primary data)

• In the case of Mean, V11 (4.21) is ranked with the highest mean followed by
V9 (4.11).
• In case of Standard Deviation, V8 (1.12) is ranked with the highest standard
deviation followed by V7 (1.07) and V13 (1.06).
• In case of Confidence Level, V8 (0.22) is ranked with the highest confidence
level followed by V7 and V13 (0.21)

Anova

62
 An ANOVA Test is a way to find out if survey or experiment results are
significant. In other words, they help you to figure out if you need to reject the null
hypothesis or accept the alternative hypothesis.

Gender-Wise Anova

Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
Gender 100 154 1.54 0.25091
V4( Profitability) 100 401 4.01 0.9999

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 305.045 1 305.045 487.757 2.60126E-55 3.88885
Within Groups 123.83 198 0.6254

Total 428.875 199

From the above anova test that the P-value is more than 0.05, hence it
is non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Hence it is conclude that Frauds do not have a significant impact on

profitability of the Indian banking sector.

63
Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
Gender 100 154 1.54 0.25091
V7( NPAs) 100 330 3.3 1.16162

ANOVA
Source of Variation SS Df MS F P-value F crit
6.8673E-
Between Groups 154.88 1 154.88 219.295 34 3.88885
Within Groups 139.84 198 0.70626

Total 294.72 199

From the above anova test that the P-value is more than 0.05, hence it is non-
significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Hence it is conclude that Frauds do not have a significant impact on Non-

Performing Assets in the Indian banking sector.

64
Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
Gender 100 154 1.54 0.25091
V8(Hiring of
educated and more
qualified people) 100 350 3.5 1.26263
V9(Proper and
regular audit
control) 100 411 4.11 0.70495
V10(Forensic
accounting) 100 359 3.59 0.8302
V11(Education,
training and
awareness
programmes) 100 421 4.21 0.55141
V12(Charging of
penalties to the
fraudulent people) 100 347 3.47 1.0597
V13(OTP) 100 377 3.77 1.12838
V14(Introduction
of thumb
impression along
with signature) 100 397 3.97 1.03949
V15(Maintain the
accuracy and
reliability in
accounting
records) 100 403 4.03 0.65566

ANOVA
Source of P-
Variation SS df MS F value F crit
2.5E-
Between Groups 524.86 8 65.6075 78.9043 98 1.94878
Within Groups 740.85 891 0.83148

Total 1265.71 899

From the above anova test that the P-value is more than 0.05, hence
it is non-significant. Therefore null hypothesis is accepted and alternative hypothesis
is rejected.

65
. Hence it is conclude that the frauds don’t have significant prevention
and control in banking system.

Bank Wise Anova

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V1(Lack of
training) 100 344 3.44 1.01657

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 92.48 1 92.48 108.994 1.31225E-20 3.88885
Within Groups 168 198 0.84848

Total 260.48 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V2(Lack of adequate
supervision of top
management) 100 362 3.62 0.74303

66
ANOVA
Source of Variation SS df MS F P-value F crit
4.6695E-
Between Groups 118.58 1 118.58 166.611 28 3.88885
Within Groups 140.92 198 0.71172

Total 259.5 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V3(Heightened by
technological
advancements in
recent times) 100 387 3.87 1.00313

ANOVA
Source of P-
Variation SS df MS F value F crit
8.8E-
Between Groups 160.205 1 160.205 190.32 31 3.88885
Within Groups 166.67 198 0.84177

Total 326.875 199

From the above anova test that the P-value is more than 0.05, hence
it is non-significant. Therefore null hypothesis is accepted and alternative hypothesis
is rejected.

67
Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V4(Profitability) 100 401 4.01 0.9999

ANOVA
P-
Source of Variation SS df MS F value F crit
3.9E-
Between Groups 186.245 1 186.245 221.68 34 3.88885
Within Groups 166.35 198 0.84015

Total 352.595 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V5(Integrity and
stability of the
economy) 100 392 3.92 0.6198

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 169.28 1 169.28 260.39 6.05028E-38 3.88885
Within Groups 128.72 198 0.6501

68
Total 298 199
From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V6(Trust and
confidence of
customer) 100 405 4.05 1.11869

ANOVA
Source of
Variation SS df MS F P-value F crit
1.618E-
Between Groups 194.045 1 194.045 215.715 33 3.88885
Within Groups 178.11 198 0.89955

Total 372.155 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804

69
V7(NPAs) 100 330 3.3 1.16162

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 74.42 1 74.42 80.8026 2.00584E-16 3.88885
Within Groups 182.36 198 0.92101

Total 256.78 199

From the above anova test that the P-value is more than 0.05, hence it
is non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V8(Hiring of
educated and more
qualified people) 100 350 3.5 1.26263

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 100.82 1 100.82 103.776 7.27555E-20 3.88885
Within Groups 192.36 198 0.97152

Total 293.18 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

70
Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V9(Proper and
regular audit
control) 100 411 4.11 0.70495

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 206.045 1 206.045 297.462 2.66837E-41 3.88885
Within Groups 137.15 198 0.69268

Total 343.195 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V10(Forensic
accounting) 100 359 3.59 0.8302

ANOVA
Source of
Variation SS df MS F P-value F crit
Between Groups 114.005 1 114.005 150.939 3.7139E- 3.88885
71
 26
Within Groups 149.55 198 0.7553

Total 263.555 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V11(Education,
training and
awareness
programmes) 100 421 4.21 0.55141

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 226.845 1 226.845 368.309 4.60112E-47 3.88885
Within Groups 121.95 198 0.61591

Total 348.795 199

From the above anova test that the P-value is more than 0.05, hence
it is non-significant. Therefore null hypothesis is accepted and alternative hypothesis
is rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804

72
V12(Charging of
penalties to the
fraudulent people) 100 347 3.47 1.0597

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 96.605 1 96.605 111.034 6.77342E-21 3.88885
Within Groups 172.27 198 0.87005

Total 268.875 199

From the above anova test that the P-value is more than 0.05, hence it
is non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V13(OTP) 100 377 3.77 1.12838

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 142.805 1 142.805 157.901 5.18886E-27 3.88885
Within Groups 179.07 198 0.90439

Total 321.875 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

73
Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V14(Introduction
of thumb
impression along
with signature) 100 397 3.97 1.03949

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 178.605 1 178.605 207.692 1.13439E-32 3.88885
Within Groups 170.27 198 0.85995

Total 348.875 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

Anova: Single
Factor

SUMMARY
Groups Count Sum Average Variance
Banks 100 208 2.08 0.6804
V15(Accuracy and
reliability in
accounting
records) 100 403 4.03 0.65566

ANOVA

74
 Source of
Variation SS df MS F P-value F crit
3.6347E-
Between Groups 190.125 1 190.125 284.605 40 3.88885
Within Groups 132.27 198 0.66803

Total 322.395 199

From the above anova test that the P-value is more than 0.05, hence it is
non-significant. Therefore null hypothesis is accepted and alternative hypothesis is
rejected.

75
CHAPTER 5: CONCLUSION AND SUGGESTION

5.1: CONCLUSION

After conducting the research with the help of primary and secondary
data, the researcher found that lack of training, lack of adequate supervision of top
management, technological advancement in recent times, etc. are the causes of bank
fraud. Frauds have a significant impact on profitability of the Indian banking sector.
Bank frauds damage the integrity and stability of the economy. Fraud has damaged
the trust and confidence of customer about the bank. Frauds have a significant impact
on Non-Performing Assets in the Indian banking sector.

According to research, the researcher has found that education, training

and awareness programmes, forensic accounting, charging of penalties to the
fraudulent people, maintain the accuracy and reliability in accounting records, proper
and regular audit control has been the measures that should be implemented to
prevent and control the fraud.

Hiring of educated and more qualified people in the bank would reduce the
fraud. OTP is a solution of ATM fraud and introduction of thumb impression along
with signature is also the solution of prevent bank fraud.

76
5.2: SUGGESTION

• Bank should adopt a strong verification system which enables them to identify
the fraudulent practice before the loan or advance has been credited.
• If banks want to combat with financial fraud and the financial discrepancies,
they need to the adoption of the forensic accounting.
• The bank should be periodic review of Know Your Customers, Know Your
Employees, Know Your Partner policies.
• Hire of educated and more qualified people in the bank.
• Bank can maintain the accuracy and reliability in accounting records.
• Bank should adopt a proper and regular audit in the banking sector.
• Bank can introduce the thumb impression along with signature to prevent
fraud.
• Use of technology for preventing fraud should be encouraged within banking
ecosystem.
• New technology like blockchain can be used to record all banking
transactions.
• All internal and external audits must be completed on time at branch level.
The audit reports should be shared with the government's auditors and
examined by the RBI.

77
REFERENCE

• Ainsley Granville Andre Jorege Bernard, Brahma Edwin Barreto, Rodney D'Silva.
(2019). Impact of Frauds on the Indian Banking Sector. International Journal of
Innovative Technology and Exploring Engineering , 8 (7S2), 219-223.
• Aluseen O. Alsayed, Anwar L. Bilgram.i. (2017). E-Banking Security: Internet Hacking,
Phishing Attacks, Analysis and Prevention of Fradulent Activites. International
Journal of Emerging Technology and Advanced Engineering. ISSN 2250-2459 , 7 (1).
• Anju Rohilla, Dr. Ipshita Bansal. (2017). Combat Loan and Advance Related Fraud- A
Study of Indian Banking Sector. International Journal of Research in Finance and
Marketing , 7 (6), 26-36.
• Asha Khanna, Bindu Arora. (2009). A Study ti Investigate the Resons for Bank Frauds
and the Implementation of Preventive Security Controls in Indian Banking Industry.
Journal of Business Science and Applied Management , 4 (3), 1-23.
• B.A Badeja, [Link], M.R Taiwo. (2017). Fraud Detection in the Banking System
in Nigeria Challenges and Prospects. Journal of Economics and Business (2), 255-282.
• Chakrabarty, K. C. (2013). Frauds in the Banking Sector:Causes, Concerns and Cures.
• Charan Singh, Deepanshu Pattanayak. (2016). Fraud in the Indian Banking Sector.
• Deloitte. (2015). Indian Banks fraud Survey Deloitte Touche Tohmatsa India.
• Dhirendra Pandey, Shweta Sankhwar. (2016). A Safeguard Against ATM Fraud.
International Conference on Advanced Comuting. DOI 10.1109 , 701-705.
• Haugen, S. , Selin J.R. (2011). Identifying and Controlling Computer Crime and
Employee Fraud. Journal Industrial Management & Data Systems , 99 (8), 340-4.

78
 • Kehinde Adekunle Adetiloye, Felicia Omowanmi Olokoyo, Joseph Niyan Taiwo.
(2016). Fraud Prevention and Internal Control in the Nigerian Banking System.
International Journal of Economics and Financial Issues , 6 (3), 1172-1179.
• Khanna,A; Arora,B. (2009). A Study to Investigate the Resons for Bank Fraud and the
Implementation of Preventive Security controls in Indian Banking Indusry.
International Journal of Business Science and Applied management , 4 (3), 1-21.
• Krummecks, Varela-Neira [Link] Casilles, [Link] Iglesias, V. (2010). Lack of
Professional Treatement: Effects On Dissatisfication after a Sevices Failure. Journal
of Service Management. , 21 (1), 45-68.
• N.P. Singh. (2007). Online Fraud in Banks with Phishing. Journal of Internet Banking
and Commerce , 12 (2), 1-27.
• newsletter, c. A. (2011). Fraud Prevention. Retrieved from
[Link]/articles/[Link].
• Ogundana Oyebisi, Okere Wisdom, Ogunleye Olusoga and Oladapa Ifeoluwa. (2018).
Forensic Accounting and Fraud Prevention and Detection in Nigerian Banking
Industry. COJ Reviews and Research ISSN 2639-0590 , 1 (1), 1-8.
• Oluwalami Matthew Fadyo. (2018). An Examination of E-Banking Fraud Prevention
and Detection in Nigeria Bank.
• Shweta Sankhwar, Dhirendra Pandey. (2016). A Safeguard Against ATM Fraud. (pp.
701-705). International Conference On Advanced Comuting.

APPEDICES

Questions

Topic: “To study the fraud prevention and control in the banking
sector/system”

Dear respondents,

This survey is to collect your perception about “Fraud prevention and

control in the banking sector or system.” Your valuable input is requested, which will

79
be utilized my research project work. You are kindly requested to spend around 3-4
minutes to submit your best responses.

Thanking You!!!

Sayali S Gadge

1. Gender *
• Male
• Female
2. Age *
• Below 20
• 20-30
• 30-40
• 40-50
• 50 and above

3. Banks *
• Public
• Private
• Co-operative

4. According to you does lack of training leads to fraud in banking sector? *

• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

5. According to you does lack of adequate supervision of top management can

cause to fraud? *
• Highly Agree
• Agree

80
• Neutral
• Disagree
• Highly Disagree

6. Do you think that bank fraud has been heightened by technological

advancements in recent times? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

7. Do you think that financial fraud impact on profitability of banks? *

• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

8. Does integrity and stability of the economy is affected by financial bank

fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

9. Do you think that fraud has damaged the trust and confidence of customer
about the bank? *
• Highly Agree
• Agree
• Neutral
• Disagree
81
• Highly Disagree

10. According to you does fraud in the banking sector is reason of continuous
rise of NPAs (Non-Performing Assets)? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

11. Do you think that hiring of educated and more qualified people in the bank
would reduce the fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

12. Do you think that proper and regular audit can control the banking fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

13. According to you does forensic accounting can be effective measure for bank
to overcome from financial fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

82
14. Does education, training and awareness programmes can be the measures
that should be implemented to prevent fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

15. Do you think that charging of penalties to the fraudulent people can act as a
solution for fraud in the banking sector? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

16. Do you think that OTP (One Time Password) can be a solution to the ATM
fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

17. Do you think that introduction of thumb impression along with signature can
prevent the banking fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree

83
 • Highly Disagree

18. Do you think that maintain the accuracy and reliability in accounting records
can control the banking fraud? *
• Highly Agree
• Agree
• Neutral
• Disagree
• Highly Disagree

Abbreviations

84