PROJECT REPORT ON

“BANKING FRAUDS”

SUBMITTED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE OF BACHELOR

OF BUSINESS ADMINISTRATION (BBA)

SYBBA (2022-2023)

SUBMITTED BY

ISHIKA PATEL

UNDER THE GUIDANCE OF

PROF. Sarita Goyal

AUDYOGIK SHIKSHAN MANDAL’S COLLEGE OF COMMERCE, SCIENCE &

INFORMATION TECHNOLOGY PIMPRI PUNE 411019

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 DECLARATION

I hereby declare that this project report titled "BANKING FRAUDS" in

"PUNE" is the result of my own effort in the training which I did as a
part of the curriculum, for the fulfilment of BACHELOR OF
BUSINESS ADMINISTRATION (BBA). It has not been duplicated
from any other earlier works and all information provided in this report
is genuine. This report is submitted for the partial fulfilment of BBA
program. It has not been submitted to any other university or for any
other degree.

DATE: 4th January 2023

ISHIKA PATEL

BBA

ASM CSIT

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 ACKNOWLEDGEMENT

I have benefited a lot from this project in my course BBA. This project
has been a rewarding knowledge. I have got into the various aspects of
by Bank analyzing various information sources on the outlet and
internet. I take this opportunity to acknowledge the invaluable assistance
of those People who helped me in successful completion of this project
and also express my special thanks to Prof. Sarita Goyal (Finance
Faculty) who provided me an opportunity to do this project. Last but not
least I express my thanks to all the people and friends who always
encourage me and provided me support at all times.

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 TABLE OF CONTENT

SR. CONTENT PAGE NO

NO

1 OBJECTIVE OF STUDY 5

2. INTRODUCTION 7

3. RESEARCH METHODOLOGY 16

4. DATA ANALAYIS 17

5. CONCLUSION 28

6. REFERANCE 29

7. DATA COLLECTED FROM THE VISIT 31

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OBJECTIVE OF STUDY
1. The goal of the study is to assess the degree of internal control mechanism
implementation.

2. It aims to pinpoint the procedural errors and various other root causes of bank frauds.

3. The study aims to understand bank employees' attitudes toward bank frauds and their
compliance with the application of preventive measures.

4. Additionally, it assesses the variables that affect compliance levels.

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BANKING FRAUDS

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INTRODUCTION

WHAT IS BANKING FRAUDS ?

 Banking fraud is a type of financial crime that involves defrauding depositors of their
money while falsely claiming to be a bank or other financial institution in order to obtain
money, assets, or property that belongs to that institution.

TYPES OF BANAKING FRAUDS ARE:

1) PHISHING SCAMS
2) VISHING SCAMS
3) SALES FRAUD
4) STEALING OF INFORAMTION BY USING UNIDENTIFIED APPS LINKS
5) FAKE ATM CARD FRAUD
6) REMOTE HACKING
7) SMS CLONING
8) FAKE LINKS OR SEARCH
9) QR CODE SCAM
10) FAKE PROFILES OR IDS

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1. How do phishing scams operate?
a) Fraudsters create phishing websites that mimic real websites, including those for
banks, e-commerce sites, search engines, and other services. Among other
channels, scammers use SMS, social media, email, and Instant Messenger to
disseminate links to these websites.
b) Many users enter security information like a Personal Identification Number
(PIN), One Time Password (OTP), Password, and other details when they click on
the link without first checking the Uniform Resource Locator (URL). These
details are then collected and used by fraudsters.
2. How does vishing operate?
a) Imposters calling or approaching customers over the phone or through social
media may be posing as bankers, company executives, insurance agents,
government officials, or other figures. In order to gain trust, imposters reveal a
few consumer details, such as the customer's name or birthdate.
b) By invoking an urgency or emergency like the "emergency," imposters may
coerce or trick customers into sharing private information such as passwords,
OTPs, PINs, and Card Verification Values (CVVs).
3. Using online sales platforms for fraud
a) Fraudsters assume the role of buyers on online marketplaces and express interest
in the product(s) being sold. To win people's trust, a number of con artists
impersonate defense personnel stationed in distant locations.
b) They use the "request money" option in the Unified Payments Interface (UPI) app
in place of paying the seller and demand that they confirm the request by entering
the UPI PIN. Every time money is received, it is transferred to the fraudster's
account.
4. Frauds committed using unreliable/unverified mobile apps
a) The RBI claims that scammers spread specific app links via SMS, email, social
media, Instant Messenger, etc. that are disguised to resemble legitimate app stores'
already-existing apps. The customer is tricked by fraudsters into clicking on these
links, which causes the customer's mobile device, laptop, desktop, etc. to
download unknown or unverified apps.

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 b) When the malicious app is downloaded, the scammer has full control over the
customer's device. These include messages or OTPs received before or after
installing such apps, as well as private information saved on the device.
5. ATM card theft
a) Criminals who steal information from customers' cards install skimming devices
in ATMs. According to a statement made by the RBI, "Fraudsters may also install
a dummy keypad or a small, well-hidden pinhole camera to capture ATM PIN.?”
b) Occasionally, when a customer enters their PIN into an ATM machine, fraudsters
posing as nearby customers can access the PIN. The duplicate card is then made
using this information, and the customer's bank account is then debited.
6. Remote access and screen sharing fraud
a) Customers are advised by RBI to follow the procedure after being tricked into
downloading a screen-sharing app.
b) With the help of such an app, fraudsters can monitor or take control of a
customer's smartphone or laptop and access their financial information. Utilizing
the customer's Internet banking or payment apps, fraudsters can conduct
unauthorized fund transfers or make payments.
7. SIM swapping and SIM cloning
a) "Fraudsters may obtain a duplicate Subscriber Identity Module (SIM) card
(including electronic-SIM) for the registered mobile number linked to the
customer's bank account by gaining access to the customer's Subscriber Identity
Module (SIM) card in cases such as SIM swap or SIM cloning," states the RBI.
b) Fraudsters use the OTP received on such a duplicate SIM to conduct fraudulent
transactions. Fraudsters generally collect personal / identity details from
customers by posing as telephone / mobile network staff and requesting the
customer details in the name of offers such as free SIM card upgrade from 3G to
4G or additional SIM card benefits.
8. Frauds that manipulate search engine results by compromising credentials
a) Search engines are used by customers to locate the phone number for their bank,
insurance provider, Aadhaar update center, and other businesses. Scammers

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 frequently alter these contact information listings on search engines so that they
appear to belong to the appropriate entity.
b) Customers might end up calling unknown or unverified numbers listed as bank or
company contact information on search engines. When customers call these
phone numbers, the fraudsters request their card information to verify their
identity. Customers divulge their security information thinking the fraudster is an
actual RE representative, making them vulnerable to scams. According to RBI's
booklet.
9. Scam using a QR code
a) According to RBI, fraudsters frequently contact customers using a variety of ruses
and persuade them to scan Quick Response (QR) codes using the apps on the
customers' phones.
b) Customers may unknowingly authorize the fraudsters to withdraw money from
their accounts by scanning such QR codes.
10. Use of forged profiles on social media
a) Because so many people use social media and frequently update their
information, it is simple for scammers to obtain information to defraud users.
The RBI booklet states that "fraudsters create fake accounts using information
about users of social media platforms like Facebook, Instagram, Twitter, etc.
b) Then, fraudsters contact the users' friends and ask them for money for emergency
medical expenses, payments, etc. Using false information, fraudsters can also
contact users and slowly win their trust. When users divulge personal or private
information, fraudsters use that information to extort money from users through
blackmail.
11. Money Laundering: Money laundering is when criminals deposit fraudulently obtained
sums of cashinto a bank. They typically try to make the funds look as though they have
come from a legitimate source. Frauds are classified, mainly on the basis of the
provisions of Indian Penal Code (IPC), as under :
a. Misappropriation and criminal breach of trust.
b. Fraudulent encashment through forged instruments, manipulation of books of
account or throughfictitious accounts and conversion of property.

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 c. Unauthorized credit facilities extended for reward or for illegal gratification.
d. Negligence and cash shortages.
e. Cheating and forgery.
f. Irregularities in foreign exchange transactions.
g. Any other type of fraud not coming under the specific heads as above.
h. Bank frauds jumped more than twofold in the previous fiscal on delayed detection
even as theReserve Bank of India mandated implementation of early warning signals
by lenders.

Now, the RBI saidit’s looking at revamping the EWS mechanism—introduced in 2015 for banks
to discover, monitor andcapture various signals denoting potential risks or vulnerabilities in
borrower accounts.

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THE CONSEQUENCES OF BANAKING FRAUD

1. Money laundering, however, has an impact on the social, political, and economic health
of a nation. The costs of money laundering, both monetary and social, were briefly
discussed in this article.
2. Money laundering has a number of negative effects on the economy, including:
(1) undermining the integrity of financial markers
(2) undermining the credibility of the private sector
(3) losing control over economic policy
(4) economic distortion and instability
(5) revenue loss
(6) risks associated with privatization efforts
(7) reputation risk.
The expansion of criminal enterprises by drug traffickers, smugglers, and other
criminals is one of the social costs of money laundering, as is the transfer of economic
dominance from the market, the government, and citizens to criminals. Money
laundering, in severe circumstances, can result in a total takeover of the legal
government. Anti-crime initiatives must include anti-money laundering measures
because they are both essential and successful. Around the world, money laundering
poses a challenging and evolving issue. In order to limit criminals' ability to launder
their proceeds and engage in criminal activity, global standards and increased
international cooperation are required due to the sheer global nature of money
laundering.

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WHY DO PEOPLE COMMIT FRAUDS?

1. FINANCIAL PRESSURE

2. OPPORUNITY (LOW RISK OF GETTING CAUGHT)

3. RATIONALISZZATION (PERSONAL REASON OR DISHONEST INTENSION)

FOR EXAMPLE: Why would a millionaire want to do that? That was my first thought when I
heard about how Nirav Modi manipulated the financial system to get false LOUs (Letters of
Undertaking) worth $1.77 billion from PNB. After all, there are other avenues to generate
money, including family, private equity, and others. In 2016, Nirav Modi ranked 71st out of 100
richest Indians according to Forbes. (Revenue of $1.74 billion at age 45). The diamond king of
India, he catered to the biggest stars in the world, including Priyanka Chopra, Dakota Johnson,
and Kate Winslet. I was perplexed as to why someone with so much money would desire even
more of it, let alone by such a wealthy person.The other pressure that he could have been under
is the one created by ambition or the gap between where he was and where he would like to be.
His ambition was to have a 100 stores by 2025, and he had stores in New York, Hong Kong, and
London besides Mumbai and Delhi of course. If he wanted to fund several more shops across the
world, that could have ultimately led him to create the PNB fraud with false LOUs.The 100
global stores were also the opportunity which would catapult Nirav Modi to even further global
fame. The 100 stores were a valuable target both for personal gain and professional gain which
for him might have rationalized the need for a bank fraud. He might have rationalized his actions
because only what he was doing would help create a truly global brand called Nirav Modi.

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WAYS TO PREVENT BANKING FRAUDS

1. KEEP CHANGING YOUR PASSWORD WITH THE TIME

2. NEVER USE PUBLIC COMPUTERS FOR NET BANKING

3. USE ONLY VERIFIED APPS OR WEBSITES FOR ONLINE BANKING

4. DO NOT FALL PREY TO PHISHING

5. SECURE YOUR COMPUTER

6. BE EXTREMELY CAREFUL WHILE USING YOUR DEBIT/CREDIT CARD

7. BY BEING AWARE OF BANKING FRAUDS

1. KEEP CHANGING YOUR PASSWORD WITH THE TIME:

To protect yourself from prospective hackers, update your password every two to three months.
Furthermore, if you change your password, make sure it's a strong one with at least eight
characters, a combination of capital and lowercase letters, digits, and special characters. It goes
without saying that you should never reveal your password to anyone.

2. NEVER USE PUBLIC COMPUTERS FOR NET BANKING:

At all costs, avoid using public computers for online banking. Using a public device exposes
your financial information to dangers, and a hacker might quickly gain access to your safe
information, putting you at risk of losing money in your bank account.As a result, make it a life
rule to never use public computers for online banking in order to avoid the headaches of dealing
with fraud.

3. USE ONLY VERIFIED APPS OR WEBSITES FOR ONLINE BANKING:

To conduct any online monetary transactions, it is usually advisable to use secure and verified
apps or websites. Online banking fraud can occur if you use unapproved software or a website.
As a result, we only use authentic apps or websites that make transactions simple and secure.

4. MAKE SURE TO USE ONLY SECURE INTERNET CONNECTION:

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Using the internet in public settings is not always safe. It can pose a serious threat to your
personal and financial data. As a result, when making online payments, you always sign up with
a secure internet connection.Additionally, use a strong password to secure your home wireless
internet connection.

5. DO NOT FALL PREY TO PHISHING:

In the guise of cash back, prizes, or other incentives, the fraudster can pose as a bank employee
checking in for your bank details or OTP. They can access your bank account without your
awareness if they get the necessary information.As a result, you should avoid clicking or
responding to any questionable links or phone calls that could aid hackers in gaining access to
your bank account.

6. SECURE YOUR COMPUTER:

With the number of cyber-attacks on the rise, it's more important than ever to have antivirus
software installed on your computer. Antivirus software must be installed, updated, and enabled
on your computer on a regular basis. This aids in the detection of threats and malicious activity
that could result in the theft of your personal information.

7. BY BEING AWARE OF BANKING FRAUDS

Many examples have been reported of card fraud being registered under the guise of providing
travel advantages, packages, and other services. If your card is lost, notify the bank right once
and get it blocked. Furthermore, never give up your credit/debit card information to an unknown
caller or texter.

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RESEARCH METHODOLOGY
A systematic, scientific approach to studying a problem is known as research methodology. In it,
we look at the various causes of the issue and the reasoning behind them. The researcher must be
familiar with both the methodology and the research method or technique. The environment is
evocative of this learning. The evocative analysis clarifies the research and provides a
description of the customer demographics. Principal and derivative data are also being used to
gather data. Raw data gathered through one-on-one interviews, observations, and structured
questionnaires is essential information.

Type of Data:

Primary data and Secondary data

Primary data : I have collected the data by visiting the bank

Secondary data: I have used and collected the data from various articles and reports available on
the web.

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DATA ANALYSIS
A survey was administered to 253 bank employees of the area under study, which
comprised of some important districts of Uttrakhand state of India and adjoining areas.
Closed ended questionnaire was used to know the opinion of bank employees. The
questionnaire comprised of questions that purported to know about their training status, attitude
towards procedures prescribed by RBI, awareness level towards frauds and their compliance
level under six heads (Deposit Account, Loans and Advances, Administration of Passbook
and Cheque book, Drafts section, Internal and Inter branch accounts, and Credit Card section).
The questions were developed on the basis of RBI‟s guidelines and instructions for
prevention of bank frauds, Mitra committee report, books, journals, circulars and manuals of
the banks. This questionnaire was initially given to 20 officials of various banks for pilot
testing. It was also shown to the experts in banking field and experts in research
methodology. After discussion with the experts and on seeing the respondent’s responses, it
was felt that three different sets of questionnaire were needed to be prepared for three different
authority level, as the authority and responsibility is different for managers, officers and clerks.
The selection of the respondents was done through multistage random cluster sampling. First
step included selection of banks. There were 36 banks in the area under study. From the list of 36
banks 17 banks were selected randomly. Each bank had several branches in the area under
study. Second step involved the selection of branches. The branches were also selected
randomly and the selection of branches in different areas was done proportionately. Every
employee of the selected branch was given the questionnaire by personally visiting them in
bank. Out of all the employees who were given the questionnaire only 253 employees
responded, they comprised of 46 managers, 110 officers and 97 clerks. Since sample
distribution is skewed, non-parametric tests were used. Mann Whitney test was used to
determine whether the two independent samples (categories or groups mentioned) have been
drawn from the same population and Chi square test was used to explain whether or not two
attributes are associated with each other. The sample was divided into groups on the basis of the
following parameters:

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 Table 1: Division of respondents into categories for various parameters Parameter Category /
Group Compliance Score of bank employees High Medium Low Attitude of bank employees
towards Procedures Prescribed by RBI Favourable Moderate Unfavourable Training status
Trained Untrained Awareness level of bank employees High Medium Low Hierarchical level
Managers Officers Clerk.

The results indicate that the security control measures prescribed by RBI are not fully complied
with. The security controls prescribed by RBI if followed with 100 percent adherence can
greatly prevent frauds. The level of compliance of these security controls was measured under
six heads, they were, internal checks, deposit accounts, administration of cheque books and
passbooks, loans and advances, drafts, internal accounts and inter branch accounts.

Principal reasons for loan and advance fraud failure to submit control returns to controlling
authorities for loans approved, bills purchased, excess drawing allowed, etc. by the branches It is
not required to submit stock statements on a regular basis as described in the bank manual. This
should always be done. 36.54% of respondents take stock statements frequently or infrequently,
compared to 63.46% who always do so. A surprise check to examine and verify the goods is not
used to physically inspect the quantity and quality of the goods. The branch officials' inspection
of hypothecated stocks is tardy and uninteresting. Only 51.92 percent of respondents always
periodically check the quantity and quality of goods pledged.

The control of security represented by hypothecation charges is not strictly governed by the
banks' established rules and procedures. Unscrupulous borrowers frequently find that security
documents are woefully inadequate and take full advantage of this. The bank does not make sure
that its name boards are prominently displayed at the location where the goods that are the
subject of a hypothec are kept. Stocks that have been hypothecated are not properly protected
against risk. The officer in charge should constantly make sure that the goods pledged are
suitable and properly secured through routine inspection. However, only 48.72% of respondents
said they always inspect, while the rest departed somewhat from this practice. There is no
guarantee that the borrower is speaking only to the lending bank.

The borrower's reputation and history, particularly the individual borrower, are not initially
seriously investigated. The final purpose of the withdrawn funds has not been confirmed. When

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determining the drawing's power, the specified margins are not taken into account. In situations
where borrower accounts are taken over from other banks, excessive haste is evident.

The bank continues to grant drawing power based on all entries and does not obtain periodic
statements of party by party, age by age, or outstanding debts. However, only 42.31% of people
always request periodic statements of their outstanding debt by age and party.

False letters of credit that appear to have been opened by other banks are presented to the
branches that will be handling the discounted bills under them. The branches do not take the
simple precaution of having a branch official verify the signatures on the letter of credit.

Analysis of human behavior is necessary for any discussion of frauds. A worker in a company is
similar to a fish in a sea. Nobody can estimate the amount and timing of a fish's water intake.
Similar to this, a dishonest and dishonest person within an organization can defraud others
without consequence. In India, bank management has its own hiring boards. The standard
operating procedure of the boards is to administer a general aptitude test, conduct an interview,
and finish the selection after a medical examination. In India, there is no psychiatric or
psychological assessment for banking services. According to the respondents, the corrupt officer
in charge is to blame for bank frauds to the tune of 4.31 weight age.

In total, 5459, 5237, and 4311 bank employees were targeted for action due to their involvement
in bank fraud cases in 2002, 2003, and 2004, respectively.

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Case 1

Date of Detection: 27/09/2003

Name of the Branch: Beckbagan, West Bengal

Amount involved in Rs: 20.03 crores

Brief facts of the case: The Branch Manager sanctioned 127 Cash Credit Accounts beyond his
delegated authority during 20.6.01 to 28.05.02. It was found that in 122 accounts with aggregate
limit of Rs.17.92 crores, had common promoters / directors. These accounts were restructured
into 17 accounts in view of same business / securities. Out of these 17 Accounts, 3 Accounts
turned NPA on 30.09.2003 and 13 Accounts became NPA (Non performing asset) on
31.12.2003. Source: Banking Division, Ministry of Finance, New Delhi

Case 2

This fraud perpetrated by an officer of the branch [who expired immediately after his
suspension on following detection of the fraud and the possibility of suicide not led out]
involved unauthorized operation in nominal accounts. The branch manager and all the rest of
the officers of the Branch relied blindly on this particular official who was very jovial with
his colleagues and active in his work. Here also the checking by superior mechanism, was
compromised resulting in siphoning off huge funds by delinquent officer, who was allowed to
operate nominal accounts by himself continuously for more than 3 years Fictitious debit in
nominal accounts were raised by him against whom the corresponding credit vouchers were
released for DD (Demand Drafts) issued A/c on near by Branch in favour of his wife or
daughter or for credit to his own HSS accounts through which money was pumped gradually.
These fictitious debits were ultimately parked in "foreign Drafts Paid" 'accounts which were not
reconciled for years together, whereas the officers himself was certifying that the “FDD
(Foreign Demand Drafts) paid Accounts was reconciled”. Even two internal Auditors
certified during the last two years that the FDD paid account of the Branch reconciled up to
date.

Source: www.indianbankassociation.org

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Case 3

Date of Detection: 05/03/2005

Name of the Branch: Dhuri Branch, State Bank of Patiala.

Amount involved in Rs: 8.75 crores

Brief facts of the case: During the surprise visit to the Dhuri branch on 10/02/2005 it was
observed that the branch had financed Agriculture business. Cash Credit limits to 3527 sugar
cane growers under tie up arrangement with M/s Bagwanpura Sugar Mills, who stood as
a guarantor. As per the tie up arrangement the antecedents of the borrowers were to be
verified by the company. On random check cases of impersonation, diversification of bank funds
by the company was observed. The controller conducted thereafter two detailed
investigations. On complete investigation it was found that out of 3527 borrowers, only
1186 borrowers were resident of the villages and they were found to be agricultural laborers &
not cane growers. In respect of remaining borrowers, large-scale impersonations had taken place
at the time of execution of documents & a large number of borrowers were also not traceable.
Source: Banking Division, Ministry of Finance, New Delhi.

Case 4

Date of Detection: 03/02/2005

Name of the Branch: Gharyala, Punjab National Bank

Amount involved in Rs: 1.142 crores

Brief facts of the case: Shri RX Tyagi the then Manager along with Shri Gurmeet Singh, the then
clerk in collusion with a group of persons in the area misappropriated bank's funds by allowing
accommodation loan in the shape of housing loans, on fabricated / fictitious revenue record,
disbursed fictitious loans under small business / transport / dairy without creating any security as
a conduit to siphon-off the funds. Current account (margin money) and saving accounts of near
relatives and friends of Shri Gurmeet Singh were used. Source: Banking Division, Ministry of
Finance, New Delhi Case 5 Two banks were duped of Rs 25 crore .The banks were the Pune
based Janata Sahakari Bank and the Mumbai base Centurion Bank. They had discounted
bills under letter of credit that were issued by good trustworthy nationalized banks. The

21
fraudster produced some attractive looking LCs (letter of credit) and follows up by presenting
bills of exchange drawn under them supported by faked evidence of trade transaction. The
banks fell for bait and discounted the bill. Dealing in bills under LC, is generally considered to
be safe because payment is guarantee by the LC issuing bank, so long as the bills are drawn
according to the provision of LC. It was only when the matured bill was presented to for
reimbursement by the negotiating bank to the bank that supposedly issued the LC that fraud
was discovered. As the bank had not issued the LC at all, it had no recourse to the drawer, who
was nonexistent.

Frequency and percentage distribution of responses of managers, officers and clerks on their
responses to the questions purported to know their degree of compliance on various preventive
security controls, their training status, attitude towards RBI procedure and their awareness level.

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Trend of Number of Fraud in Banking Operations

The following table and figure shows the trend of number of fraud in banking operations from
the year2007-08 to 2016-17. It is observed from the table that number of frauds in the case of
Advances andcard/internet shows an increasing trend over the entire period under analysis.
Considering the overallnumber of frauds, there is a steady increase during the entire period from
2007-08 to 2016-17

Table 3 Frauds in Various Banking Operations (Number of transactions)

2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
Area of Operation 08 09 10 11 12 13 14 15 16 17
Advances 1,750 1,977 2,190 2,382 1,953 2,087 1,985 2,256 2,120 2,320
Card/Internet 679 1,036 1,215 763 629 793 978 845 1,191 1,372
Deposits 458 599 666 790 857 791 774 875 759 693
Off-balance sheet 6 9 10 10 5 18 15 10 4 5
Foreign exchange
25 15 16 19 22 10 9 16 17 16
transactions
Cash 99 141 143 154 173 140 145 153 160 239
Cheques/demand drafts 192 234 202 184 172 141 180 254 234 235
Inter-branch accounts 22 16 18 10 24 6 7 4 4 1
Clearing, etc accounts 30 52 51 34 38 36 36 29 17 27
Non-resident accounts 9 26 13 9 11 17 38 23 8 10
Others 97 146 146 179 207 197 135 179 176 153
Grand Total 3,367 4,251 4,670 4,534 4,091 4,236 4,302 4,644 4,690 5,071

Source: Report on Trend and Progress of Banking in India 2019-20

Operational Fraud (Volume)

6,000 y = 107.44x + 3794.7
R² = 0.5002
5,000
4,000
3,000
2,000
1,000
0
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Operational Fraud Linear (Operational Fraud

(Volume) (Volume))

Figure 1Trend of Overall Volume of Operational Fraud

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Trend of value of Frauds inn Banking Operations

From the table and figure shows the trend of change in the amount of frauds in banking
operations from 2007-08 to 2016-7. From the analysis it is identified that the volume of fraud in
advances among all other items of fraud categories, increases throughout the period. But, from
the year 2012-13 onwards showed an exponential rate of increase in advances and overall
amount of frauds in banking operations.

Table 4 Frauds in Various Banking Operations

(Amount in ` crore)

2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
Area of Operation 08 09 10 11 12 13 14 15 16 17
Advances 721 1,402 1,263 2,740 3,552 6,530 8,334 17,123 17,367 20,556
Card/Internet 15 37 35 21 23 49 54 52 40 42
Deposits 79 66 195 583 219 291 331 437 809 903
Off-balance sheet 8 22 370 212 373 1,527 1,088 699 132 63
Foreign exchange
30 14 28 148 130 98 144 899 51 2,201
transactions
Cash 5 36 14 21 20 23 24 43 22 37
Cheques/demand drafts, 17 15 17 27 40 22 19 26 25 40
Inter-branch accounts 3 5 2 1 8 3 1 0 10 0
Clearing, etc accounts 9 45 7 11 31 7 24 7 87 6
Non-resident accounts 4 2 2 2 3 3 10 8 9 3
Others 26 39 64 56 98 112 64 162 146 77
Grand Total 917 1,683 1,997 3,822 4,497 8,665 10,093 19,456 18,698 23,928

Source: Report on Trend and Progress of Banking in India 2019-20

Operational Fraud
35000
(Value)
30000 y = 750.16e0.3707x
R² = 0.9756
25000
20000
15000
10000
5000
0
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Operational Fraud Expo. (Operational Fraud (Value))

(Value)

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Figure 2 Trend of Overall Value of Operational Frauds

Frameworks of grievance redress mechanism in banks

RBI had announced in the ‘Statement on Developmental and Regulatory Policies’ issued as part
of the Monetary Policy statement dated December 4, 2020 that with a view to strengthen and
improve the efficacy of the grievance redress mechanism of banks, a comprehensive framework
will be put in place during January 2021.

Accordingly, a framework comprising of:

a. Enhanced disclosures on complaints to be made by the banks;

b. Recovery of the cost of redress of maintainable complaints from the banks against whom
the number of complaints received in the Offices of Banking Ombudsman (OBOs) are in excess
of their peer group averages; and

c. Intensive review by RBI of the grievance redress mechanism of banks having persisting
issues in their redress mechanism has been issued today.

The redress of complaints will continue to be cost-free for the customers of banks and members
of public. The framework intends to, inter-alia, provide greater insight into the volume and
nature of complaints received by the banks as also the quality and turnaround time of redressal,
promote satisfactory customer outcomes and improved customer confidence, and identify
remedial steps to be taken by the banks having persisting issues in grievance redress mechanism.

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Strengthening of Grievance Redress Mechanism in Banks

Refer to the ‘Statement on Developmental and Regulatory Policies’ issued as part of the
Monetary Policy statement dated December 4, 2020, wherein it was stated that with a view to
strengthen and improve the efficacy of the grievance redress mechanism of banks and to provide
better customer service it has been decided to put in place a comprehensive framework
comprising certain measures.

Reserve Bank of India has taken various initiatives over the years for improving customer
service and grievance redress mechanism in banks. Detailed guidelines on customer service were
issued to banks encompassing various aspects of operations that impact customers. The Banking
Ombudsman Scheme was introduced in 1995 to serve as an alternate grievance redress
mechanism for customer complaints against banks. In 2019, Reserve Bank also introduced the
Complaint Management System (CMS), a fully automated process-flow based platform,
available 24x7 for customers to lodge their complaints with the Banking Ombudsman (BO).

As part of the disclosure initiative, banks were advised to disclose in their annual reports,
summary information regarding the complaints handled by them; and certain disclosures were
also being made in the Annual Report of the Ombudsman Schemes published by the Reserve
Bank. To further strengthen grievance redress mechanisms, banks were mandated to appoint an
Internal Ombudsman (IO) to function as an independent and objective authority at the apex of
their grievance redress mechanism.

Effective grievance redress should be an integral part of the business strategy of the banks. It is,
however, evident from the increasing number of complaints received in the Offices of Banking
Ombudsman (OBOs), that greater attention by banks to this area is warranted. More focused
attention to customer service and grievance redress will ensure satisfactory customer outcomes
and greater customer confidence.

In view of the above, and to further strengthen the customer grievance redress mechanism in
banks, it has been decided to put in place a comprehensive framework comprising of enhanced
disclosures by banks on customer complaints, recovery of cost of redress from banks for the
maintainable complaints received against them in OBOs in excess of the peer group average, and

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undertaking intensive review of the grievance redress mechanism and supervisory action against
banks that fail to improve their redress mechanism in a time bound manner.

Banks are advised to submit its Quarterly Report on frauds outstanding to Central Office, RBI,
within 15 days of the end of the quarter it relates in soft copy. The Report is to be accompanied
by acertificate to the effect that all individual fraud cases of Rs.1 Lakh and above reported to the
RBI during the quarter have also been put up to the bank’s Board and have been incorporated in
the Report.

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CONCLUSION
The bank employees do not give due importance to the problem of frauds. The awareness
level of bank employees regarding bank frauds is not very satisfactory, and majority of them do
not dispose favourable attitude towards RBI procedures as they find difficulty in following them
due to workload and pressure of competition. Moreover employees are not well trained to
prevent bank frauds. Training positively affects the compliance level of employees and improves
the attitude towards RBI‟s procedure.

According to the data, state-owned banks have the highest rates of bank fraud, and the majority
of cases of bank fraud that are reported involve advances. For better outcomes, it is suggested
that banks should develop their own Fraud Vigilance & Surveillance Department to conduct
internal investigations and to share information with external investigative agencies. By
developing a good risk management strategy and complying to rules and regulations, fraudulent
actions can be detected early on and prevented or decreased, improving the efficiency and
effectiveness of the current method and overall banking operations.

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REFERNCE
1. www.bajajfinserv.in

2. www.indiatoday.in

3. www.bankinfosecurity.com

4. www.nysscpa.org

5. www.tandfonline.com

6. www.netguardians.ch

7. www.researchgate.net

8. www.ojp.gov

9. indiaforensic.com

10. www.investopedia.com

11. Mayoor Abhyankar & Ketan Patil, Indian Journal Of Applied Research, Volume-9 |
Issue-5 | May-2019 | PRINT ISSN No 2249 - 555X

12. India Banking Fraud Survey Edition II April 2015, www.deloitte.com/in

13. Charan Singh, Frauds in the Indian Banking Industry, March 2016 IIMB-WP N0. 505,

14. P. Mary Jeyanthi, A. Mansurali, V. Harish, V.D. Krishnaveni, Significance of Fraud

Analytics in Indian Banking Sectors, Journal of Critical Reviews, ISSN- 2394-5125 , Vol 7,
Issue 4, 2020

15. MrsSunindita Pan, Analysis of Frauds in Indian Banking Sector, International Journal of
Trend in Scientific Research and Development (IJTSRD)Volume 4 Issue 3, April 2020 Available
Online: www.ijtsrd.com e-ISSN: 2456 – 6470

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16. Mamta Shah, A Case Study on Increasing of Banking Frauds in India, Parichay:
Maharaja Surajmal Institute Journal of Applied Research, Vol 2. Issue 1; January-June 2019

17. RBI, Report on Trend and Progress of Banking in India 2019-20

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 DATA COLLECTED FROM THE VISIT
Accordindly to manager most common frauds are:-
1. Phishing is an effort to "fish" for your banking information. Phishing can involve an
email that purports to be from a well-known organization, such as a bank, or a well-
known website. Please be aware that banks will never request private information like a
password for a transaction or login, an OTP, or anything similar.

2. Spear Phishing: A targeted phishing attempt through an email that not only appears to
come from a reliable source but also frequently from a member of your own company, a
superior in many cases, or a close relative is known as spear phishing. The subject line
address is unique and personalized and frequently will be relevant to either ongoing
projects or company developments or may even be connected to a family event.
When a user opens an email and clicks on an attached link, a violation takes place.
Immediately, malware or Trojans are downloaded, or a form requiring the recipient to
enter information appears on the screen.
3. Website spoofing is the act of building a fake website with the purpose of committing
fraud. Phishers use the names, logos, graphics, and even the website's code to make spoof
sites appear authentic. Even the URL that appears in the browser window's address bar
and the padlock icon in the bottom right corner can be faked.
4. Vishing: Vishing is a fraudster's attempt to obtain sensitive information from you over
the phone, such as your user ID, login and transaction passwords, one-time passwords
(OTPs), URNs (unique registration numbers), card PINs, grid card values, CVVs, or
other identifying information like your birthday or mother's maiden name. Fraudsters call
customers and pose as bank representatives in an effort to trick them into giving their
personal and financial information.
5. Skimming: The act of stealing information from cards used in ATMs and retail
establishments through their magnetic strips is known as skimming. By reading the
magnetic strip on the back of a credit/debit/ATM card, fraudsters can obtain information
from the card.
6. You could also use a tiny, carefully placed camera to record the PIN. Skimming can
happen in ATMs, eateries, stores, and other places.

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7. Smishing is the combination of SMS/text messaging and phishing, which is when
someone sends them an email pretending to be someone else in order to steal their
identity. Cell phone users all over the nation are receiving messages claiming that their
accounts are past due, need to be updated, or even that they need to sign up for a new
program. This scam makes use of toll-free phone numbers and links in the message.
8. SIM Swap: Through the mobile service provider, a fraudster is able to obtain a new SIM
card for your listed mobile number under a SIM swap or exchange.Fraudsters can obtain
the OTP and alerts needed to conduct financial transactions through your bank account
with the aid of the new SIM card.

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