Dissertation Final Abhijeet

A Study on Frauds in Indian Banking Industry: The way forward to curb
fraudulent practices & increase trust for efficient banking system
Abhijeet Singh
Student No.10511277
Word Count(Except Bibliography & Appendices):20,768.
Dissertation submitted in partial fulfilment of the requirements for the degree of
MBA in Finance
At Dublin Business School
Supervisor: Enda Murphy
May,2020.
Declaration:
I , Abhijeet Singh, hereby declare that this dissertation which I have submitted to Dublin
Business School for the award of MBA Finance is the result of my own investigation, except
where otherwise stated and clearly acknowledged by references. Furthermore, this work has
not been submitted for any other degree.
Signed: Abhijeet Singh
Student Number : 10511277
Date: 14th May,2020.
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Acknowledgement
I express my extreme gratitude to my supervisor, Enda Murphy Sir, who assisted me

throughout this dissertation. I would also like to thank all the five interviewees, who
contributed in the dissertation. Without their contribution the dissertation could not have been
completed.
I would like to thank the authors and publishers of the sources that are cited in the dissertation.
There work acted as a dependable source of information for my dissertation.
I would like to thank my parents, friends and colleagues for providing me with moral support
throughout the dissertation. Lastly, I would like to thank almighty God for giving me the
strength and knowledge to be able to complete the dissertation.
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Abstract
The purpose of this research is to gain a new perspective from the other side of the
table, to fulfil following four objectives :- 1.To understand nature and extent of frauds,
and their impact on the Indian banking system. 2.Assess effectiveness of controls /
countermeasures currently prevailing in Indian banking industry. 3.To determine areas
where gaps exist in controls/countermeasures. 4.To assess potential role of technology
in addressing these gaps.
The prime objective of the first and second part of the research is to find different
kinds of frauds prevailing in Indian Banking industry and to find out where gaps exists
in control/countermeasures & how technological innovations can be exploited to
address these gaps. The third part will propose the research methodology used while
conducting this study. The last and the final section explains the conclusion and result
which has been derived from the primary data, collected by conducting five interviews
of the senior bank officials.
The value of this research is that by analysing the findings of this research, the banks
would be able to understand where gaps exist in combating these frauds & how
technological advancement can be exploited in addressing these gaps for the future
ready next generation banks and gaining public trust and goodwill.
Keywords: Banking Frauds, Controls/countermeasures, Technological advancement,

Addressing gaps, Public trust & goodwill.
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Table of contents
S.no Topic Page No.

1 Introduction 9
1.1 Overview of the study 9
1.2 Rationale of the topic 10
1.3 Statement of the problem 10
1.4 Reason for choosing the topic 16
1.5 Research aim 17
1.6 Research Objective 17
1.7 Research Questions 17
2 Literature Review 19
2.1 Introduction 19
2.2 Theme 1: Case studies of frauds in different banks 19
2.3 Theme 2: Different categories of frauds 21
2.4 Theme 3: New types of frauds in today’s banking industry 23
2.5 Theme 4: Survey of Literatures 28
2.6 Theme 5:Deloitte’s Survey on Indian banking 30
2.7 Theme 6: Study of gaps existing in controlling/countermeasures 34
2.8 Theme 7: Adverse Effects of frauds other than monetary losses 35
2.9 Theme 8: Technological innovation to address gaps & preventing 37
frauds in future
2.10 Literature Conclusion 43
3 Research Methodology 44
3.1 Proposed Methodology 44
3.2 Research Design 44
3.2.1 Research Philosophy 45
3.2.2 Research Approach 46
3.2.3 Research Strategy 47
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S.no Topic Page No.
3.2.4 Research Choice 48
3.2.5 Time Horizon 49
3.2.6 Data Collection method 49
3.2.7 Sampling 51
3.2.8 Research Ethics 51
3.3 Research Limitations 51
4 Data analysis 53
4.1 Methodology of research 53
4.2 Participants information 53
4.3 Interviews 54
5 Discussions & Conclusions 55
5.1 Introduction 55
5.2 Comparison/Contrast of interview answers and Literature review & 55
Researcher interpretation
5.3 Conclusion of Objectives 70
5.4 Recommendations for Future 74
6 Reflection & Learning 77
6.1 Introduction 77
6.2 Learning Style 77
6.3 Self-analysis of researcher 79
6.4 Learning & development 80
6.5 Planning & Preparation 81
6.6 Application of Learning in future 81
7 Bibliography 84
8 Appendices 89
8.1 Appendix A: Interview Questions 89
8.2 Appendix B : Interview Transcripts 90
8.3 Appendix C : Information Sheet for Participants 115
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List of Figures: Page No.
Figure 1: Number of fraud cases reported by RBI. 11
Figure 2.Bank Group Wise no. of cases of frauds and amount involved. 14
Figure 3.Growing trend of cyber frauds in NEFT/RTGS transactions. 15
Figure 4. Common types of identity theft frauds/complaint percentage in 2013. 16
Figure 5. Phishing 23
Figure 6. Pharming 24
Figure 7. Malware 25
Figure 8.Money Mule case 26
Figure 9. Identity Fraud 27
Figure 10.How Skimming is done 27
Figure 11.How Sim Swap fraud is executed 28
Figure 12: The Frauds Encountered in Financial Sector (Area wise) 31
Figure 13: Factors Responsible For Bank Frauds 32
Figure 14: Fraud incidents in Retail Banking 33
Figure15: Fraud Detection Mechanism 33
Figure 16: Response to Fraud Incidents 34
Figure 17. Non-financial losses suffered as a result of incidents of fraud 37
Figure 18. Features of Blockchain that help prevent Fraud 39
Figure 19.Blockchain Process 40
Figure 20. Blockchain Decoded 41

Figure 21. Neural network 42
Figure 22.Artificial Intelligence 43
Figure 23. The Research Onion 46
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Figure 24.Flow Chart depicting procedures post Fraud Detection and Reporting in
Banks 62
Figure 25. Risk Management Structure of Banks 66
Figure 26. Kolb’s learning cycle 78
Figure 27.Peter Honey and Alan Mumford learning styles 80
List of Tables: Page No.
Table 1.Shows common types of frauds which are prevailing in the Indian banking
sector 10
Table 2. Year-wise number and amount of fraud cases in the banking sector. 12
Table 3. Bank Group wise fraud cases 13
Table 4 Bank Group wise Advance related frauds( Rs.1 Crore & above in value) 14
Table 5 Bank Group wise Technology related Frauds 15
Table 6. Current Structure for filing Police/CBI complaints in fraudulent cases 63
Important Note: Kindly note that throughout the dissertation amount has been mentioned
in Indian Rupees(Rs) which is the currency of India.
1 Crore= 10 Millions.
1 Euro= 81.47 Indian Rupees(INR)(Approx.) as on 12/05/2020.
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CHAPTER 1
1.Introduction
One of the major problems in the Indian banking industry facing today is the exponential
increase in banking frauds . For the past few years Indian banks are facing fraud related issues.
The major consequence of this problem is the banks, particularly Public Sector banks are
suffering from mounting losses and rise in NPAs(Non-Performing assets) on account of
increased level of number of frauds. (Granville, Edwin Barreto and D’Silva, 2019). The aim of
this research is to Firstly, understand nature and extent of frauds, and their impact on the
Indian banking system; Secondly, assess effectiveness of controls / countermeasures currently
prevailing in Indian banking industry; Thirdly, to determine areas where gaps exist in
controls/countermeasures ; and Finally to assess potential role of technology in addressing
these gaps.
1.1 Overview of the study
As we know that RBI(Reserve Bank of India) is the regulator of banks in India. RBI defined
fraud as “Any deliberate act committed by person which has been carried out in banking
transaction or computer system in banks which may result into wrongful gain to the person
,with or without being monetary loss to the bank”(www.rbi.org.in). The most important factor
to judge the health of financial system of any economy is to measure the level of its
consumption and production. How sound financial system is , going to decide the status and
living standard of people. However, if the banks which are the backbone of financial system
are packed with frauds and high degree of non-performing assets(NPAs), it is a matter of grave
concern for any country. Since past few years, Indian economy is, in fact ,in distress because
of these burning issues.
It is quite evident that if the financial or banking system is strong it will be echoed by growing
numbers of GDP and obviously standard of living of people. But if the system failed to perform,
then it reflects inefficiency of the country’s governance, and the cascading effect of this would
be the distress among various stakeholders. (Shah, 2019).
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Table 1.Shows common types of frauds which are prevailing in the Indian banking
sector:-
Source: (Bhasin , M. (2016). Combatting Bank Frauds by Integration of Technology:

Experience of a Developing Country. [online] Imedpub.com. Available at:
http://www.imedpub.com/articles/combatting-bank-frauds-by-integration-of-technology-
experience-of-a-developing-country)
1.2 Rationale of the topic
What is the issue?
There is exponential growth in frauds happening in developing economy like India. The banks
are facing difficulties and challenges to tackle increasing number of fraud cases because they
are not able to update to their security measures along with a better redressal system for
consumers .(Frauds in Indian banking system, C. Singh, 2016). The consequence of this is
two-fold, on one side this may lead to failure of banking system in long term and customer
will lose confidence in banking system and on the other side capital and wealth of banks are
getting eroded which is very much essential for Indian banks to comply with international
standards for maintaining capital(BASEL III norms). If these issues are not addressed
proactively, the researcher is apprehensive that this could led to collapse of banking sector in
India in the same way as happened in United State in 2008.
1.3 Problem statement
In the past few years Indian banking Industry is facing fraud related issues. Due to increased
level of frauds, Indian banks, particularly Public sector banks are suffering from mounting
losses in capital and rise in NPA(non-performing assets).It has been seen that in most of these
cases ,top management is involved creating halt on day to day activities of banks. Executives
sitting at the top hierarchy of the organisations have been charged for alleged corruption and
malafide intentions in disbursement of loans. This creates a question mark on corporate
governance and ethics in the industry. The global crisis for slowdown in industry is due to
menace of mounting NPAs in banking sector.Looking at the gravity of these problems in Indian
economy, served as the prime motivation for the researcher to carry out the detailed study of
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the frauds prevailing in Indian banking industry and examining it with a novel and different
angle.
It is quite evident that frauds in banking industry is burning issue in today’s world which is on
one hand making the customers less confident and apprehensive on the banks and on the other
hand it is creating big dent on the profitability of banks. However, to curb these problems banks
are continuously updating their capabilities by adapting latest technologies like blockchain,
neural networks ,data mining etc. Also Reserve bank of India has proactively taken steps by
collaborating with national security agencies like Central Bureau of Investigation and Police
department depending upon the magnitude of fraud. (RBI Master circular, 2017).One of the
main reasons and objective behind taking of these steps is to boost up the confidence level of
the consumers in Indian Banking industry. Because if customer lost trust in banking system
then in future following things could occur:-
• People will prefer to keep their deposits and money somewhere else and as a
consequence of this banks will lose capital and funds.
• Indian Banks will not be able to comply with international capital norms(BASEL III
norms) which is essential and needed as a buffer against risk weighted assets because
Indian banks will not be having adequate amount of capital due to shortage of public
money.
• The fiscal deficit of Indian government will increase as government has to intervene by
recapitalization of banks to counter the problem of depleting deposit base.
Frauds in the banking sector: Some statistics
If we would quantify the data related to frauds in Indian Banking industry then following table(
Figure 1) will clearly show the comparative picture:-
Figure 1: Number of fraud cases reported by RBI.
(Source: rbi.org.in)
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Note: RBI i.e. Reserve Bank of India is the regulator & Central Bank of India.
NBFC: Non-banking financial companies.
UCB: Urban Cooperative Banks.
FI: Financial Institutions.
(*1 Crore= 10 Million)
As it is quite evident from the Figure 1 that the lion’s share of frauds happened in Banking
sector. A year-wise break up of fraud cases reported to the regulator by commercial banks has
been tabulated below:-
It is quite interesting to observe that number of fraud cases shows declining trend from 24791
cases in the year 2009-10 to only 13293 fraud cases in the financial year 2012-13 which implied
a decline of 46.37%, however, the amount involved in fraud cases has increased substantially
from around Rs2037.81 crore to whopping Rs.8646.00 crore i.e. an increase of 324.27%. A
granular analysis reveals that nearly 80% of all fraud cases involved amounts less than Rs. one
lakh while on an aggregated basis, the amount involved in such cases was only around 2% of
the total amount involved. Similarly, the large value fraud cases involving amount of Rs.50
crore and above, has also increased more than tenfold from 3 cases in FY 2009–10 (involving
an amount of Rs 404.13 crore) to 45 cases in FY 2013 (involving an amount of Rs 5334.75
crore). Further, a bank group wise analysis of frauds reveals that while the private sector and
the foreign bank groups accounted for a majority of frauds by number (82.5%), the public
sector banks (including SBI Group) accounted for nearly 83% of total amount involved in all
reported frauds( Source: www.rbi.org.in) (Table 3 below).
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Different Category of frauds
Broadly, the frauds reported by banks can be divided into three main sub-groups(Chakrabarty,
2013):
• Technology related
• KYC related (mainly in deposit accounts)
• Advances related
A closer examination of the reported fraud cases has revealed that around 65% of the
total fraud cases reported by banks were technology related frauds (covering frauds
committed through /at internet banking channel, ATMs and other alternate payment
channels like credit/ debit/prepaid cards) while the advances portfolio accounted for a
major proportion (64%) of the total amount involved in frauds. Table 4 below shows
that relatively large value advances related frauds (> Rs. 1 crore) have increased both
in terms of number and amount involved over the last four years.
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Figure 2.Bank Group Wise no. of cases of frauds and amount involved.
Technology related frauds
The substantially larger proportion of technology related frauds by number is only expected as
there has been a remarkable shift in the service delivery model with greater technology
integration in the financial services sector. Banks are increasingly nudging their customers to
adopt newer service delivery platforms like mobile, internet and social media, for enhanced
efficiency and cost-cutting. But while banks’ customers have become tech- savvy and started
using online banking services and products, evidence suggests that even fraudsters are devising
newer ways of perpetrating frauds by exploiting the loopholes in technology systems and
processes. There have been several instances of low value frauds wherein the fraudsters have
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employed hostile software programs or malware attacks, phishing, Vishing (voicemail),
SMSishing (text messages), Whaling (targeted phishing on High Networth Individuals)
techniques apart from stealing confidential data to perpetrate frauds. Bank group-wise detail of
the number of technology related fraud cases with the amount involved therein over the last 4
years is as under in Table 5:
India has witnessed a massive surge in cybercrime incidents in the last ten years - from just 23
in 2004 to 72,000 in 2014-15 .As per the government's cyber security arm, computer
emergency response team-India (CERT-In), 62,189 cyber security incidents were reported in
just the first five months of 2015-16.
Figure 3.Growing trend of cyber frauds in NEFT/RTGS transactions.
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Figure 4. Common types of identity theft frauds/complaint percentage in 2013.
The electronic modes of payment like NEFT and RTGS have gained traction due to their almost
real time impact and also comparatively lower cost. Though the amount involved in technology
related frauds may not appear to be menacing when viewed in the backdrop of the total value
of daily transactions and overall business prolife of the Indian banks, any dent in the confidence
of the stakeholders in the banking system will result in huge reputational and operational risks
for the banks, adversely affect public perception and undermine faith in the financial system.
Frauds in banks’ advances portfolio
If we talk about total amount involved in frauds in the banking sector then advances/loan
related frauds accounts for the largest share. The interesting point that was found that the
government banks account for major chunk of the total amount involved in such cases of
frauds. Another glaring issue in this context is the considerable delay in declaration of frauds
by various banks in cases of consortium/ multiple financing. We have on occasions observed
more than 12–15 months lag in declaration of the same case as fraud by different banks, which
not only enables the borrower to defraud the banking system to a larger extent, but also allows
him considerable time to erase the money trail and queer the pitch for the investigative
agencies. (Mirchandani, 2014)
1.4 Reason for choosing this topic
As the researcher is from banking background( worked as branch manager in Indian public
sector bank for almost 8 years or so), hence exponential increase in frauds in Indian banking
industry grab his attention. So after some initial studies researcher finds some important facts
about frauds in banks and its role in economy. Because of recent increasing cases of frauds has
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led to depleting deposits in banks and customer losing confidence in banks, the whole Indian
banking industry comes under question. This is why researcher chooses this topic as he already
has a little knowledge about it which going to help him in making a good research work.
Moreover, researcher have good network of people from banking fraternity who would really
help in getting in-depth research of the topic. Obviously, this research is very important for
researcher from his future career prospective as well as educational prospective.
1.5 Research aim
The research aim is to find different kinds of frauds prevailing in Indian Banking industry
and to find out where gaps exists in control/countermeasures & how technological innovations
can be exploited to address these gaps.
1.6 Research objective
The research is intended to fulfil the following objectives:-
• To understand nature and extent of frauds, and their impact on the Indian banking
system.
• Assess effectiveness of controls / countermeasures currently prevailing in Indian
banking industry.
• To determine areas where gaps exist in controls/countermeasures.
• To assess potential role of technology in addressing these gaps.
1.7 Research Questions
The core of the research is the Research question because all the investigations and research
will be done on the basis of research question only. Therefore it is imperative to select well-
defined question. After careful consideration following research question is chosen:
“How to curb frauds in Indian banking sector and increase trust of customers for efficient
banking system?”
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The researcher also aims to find the answers to the following questions:
1. Does your bank has been impacted by the different kinds of fraud prevailing in
banking sector?
2. According to your view, what could be the primary sources or causes of increasing
frauds in banks?
3.According to you, what are the gaps existing in effective controls/countermeasures to

combat these frauds?
4. What policies or procedures your bank follows when some customer lodge a complaint
regarding monetary loss due to fraud because in many cases Frauds remained
unreported?
5. With the deep penetration of technology in today’s digital world, What are new kinds
of frauds your bank is experiencing?
6. How your bank is implementing new technological innovation to combat frauds?
7. What kind of risk management policies your bank has implemented to address the
burning issue of ever increasing frauds in banking sector?
8. How much amount of money your bank is spending on research to combat frauds?
9. Do you think that due to exponential increase in frauds in Indian banking sector, trust
between bank and customer is denting? If yes, How you planned to bring that trust again?
10. How can you correlate the connection between the incidents of frauds, trust of
customers and the future of Indian commercial banking industry?
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CHAPTER 2
LITERATURE REVIEW
2.1 Introduction
This chapter should assist the reader in gaining a holistic overview of relevant literature in the
research field, outlining the value and reason behind the research question and enhancing
clarity about the subject under study .
2.2. Theme 1: Case Studies of Frauds in Different Banks
Case1:
The branch manager (of a bank) initiated an application for an overdraft without the customer’s
knowledge, being aware that the customer had a deposit, to be used as cash collateral.
Additionally, the Personal Banker’s password was known so as to proceed with the application.
After the overdraft was made available in the customer’s account, the branch manager
compiled a transfer order, counterfeiting the signature of the branch customer, for transferring
the amount of the overdraft into another customer’s account to whom the branch manager had
obligations. The transaction was easily performed by the branch’s back office based on the
transfer document with the counterfeited customer’s signature. At the maturity date of this
overdraft, the branch manager started another overdraft application with the scope of closing
the previous one. The transaction was performed by using the password of the personal banker
(for the overdraft application) and of the customer service manager (to transfer the amount)
since the branch manager had no right to perform the above transactions. Then, to close the
second overdraft, the branch manager again performed unauthorized transactions from another
customer’s account. The fraud was however, discovered when the last customer walked into
the branch to withdraw the money and close his account and this was very devastating for the
bank.
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Case2:
A customer service employee performed unauthorized transactions from a customer’s account

by transferring amounts of money to his personal account (knowing that some of the customers
were no longer alive). The transactions could be easily performed since no authorization was
needed in the banking system up to a defined limit. Furthermore, some of these accounts were
dormant and for their activation an override was required, which was formally given by the
supervisor.
Case3:
A non-material fraud case occurred, that is no bank losses occurred. Due to the target pressure
for credit card products, bank employees started applications for credit cards on behalf of
customers without customer awareness. They attached in the application system copies of the
photocopied ID documents stored in the existing files of the customer’s current account, in
order to have risk approval for the card limit. The fraud was revealed when risk analysts
interviewed the customers via phone. Even if the credit card limit had been approved, no loss
would have occurred since the customers were unaware that they had been issued a card.
Case4:
A customer came to a bank to deposit a certain amount of money. Since the teller told him that
the system was down, he gave the money on trust and came to the bank the next working day
in order to sign the deposit slip. When the customer came to the bank, he noticed (verifying on
the ATM) that the amount left on trust had only partly been deposited in his account. The
customer asked for an explanation from the teller, who declared that she had his funds and
immediately booked the difference. While the teller booked the difference into the account of
the customer, she did not have all the funds in the cash box (she had used a part of them for
personal purposes). Hence, the teller performed a withdrawal transaction from the account of
another customer to cover the difference.
Case 5:
Fraud through Social Media:
Modus Operandi of the Cheating:
The customer was having friend on face book pretend to be from UK. The friend sent a message
to the customer regarding her visit to India along with copy of ticket. Next day, customer got
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a call from Air Port that Ms. X has arrived to India and she is having Cheque of Rs.4 crores.
She will . not be allowed to come out of airport without completing tax/ Money laundering
related formalities. She does not have any other money and is required to pay Rs.2 lacs to clear
this. Customer was given three account numbers through email of custom office. One of the
accounts given was of Bank X. Customer in trust, deposited the money. Afterwards, when tried
to contact the person who called him, he/she was unable to contact. He realized that he was
cheated by someone.
2.3. Theme 2: Different categories of Frauds
Banking frauds can be classified in three broad categories (Chakraborty, 2013):
(i) Technology Related Frauds
Since banks have been trying to focus on providing alternative channels to the customers, other
the physical branches, as a part of ‘branchless banking’, it has left some holes providing space
to fraudsters (Bhutto &Janjua, 2011). All the fraudulent activities which are performed
at/through internet banking channel; at ATMs by stealing pins or using fake pads; cloning fake
debit or credit cards; using mobile banking services – these all form a part of technology related
frauds. To cut their costs and time, customers are adopting web as a new means of faster
transactions (Berney, 2008; Dubey, 2013) This acts as a welcoming chance to fraudsters since
customers are not present physically to authenticate their transaction (Malphurus, 2009; Gates
& Jacob, 2009). Customers are victimized by criminals who steal their identities, make usage
of stolen or lost cards or gain an unauthorized access of the customers’ accounts through wrong
means (Gates & Jacob, 2009; Greene, 2009). New, even more complex and sophisticated
means are employed to steal data online (Singh, 2013). A common practice used these days is
“phishing”. Under phishing, private data of the customers like user ID or password is asked
through an e-mail. This practice has become a serious threat to online security (Bergholz et al.,
2010). The payment through online banking or cards is gaining importance globally
(Worthington, 2009). In India, private sector banks has a bigger share in technology related
frauds by private including online banking, ATM , cards and other digitized transactions ( Soni
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& Soni, 2013). The volume of fraudulent transactions committed by a third party has risen
(Banks, 2005).
(ii) KYC Related Threats
Banks which are lenient in observation (Sharma & Brahma, 2000) and fulfilling the KYC
requirements are preyed with such threats. They either do not submit proper documentation or
submit stolen documentation. A lax corporate culture with inadequate internal controls, lack of
requisite risk controls and negligent staff filled with overconfidence shapes a perfect “Fraud-
friendly environment” (Harris & William, 2004). Improper documented accounts are basically
deposit accounts to fool the customers by sending e-mail or SMS of winning prize or lottery.
In return asks to deposit some processing charges. As soon as the money is deposited, it is
withdrawn through ATMs. Using stolen identities is another grooming practice. It is basically
called identity theft. It may comprise fraudsters illicitly gaining access to customer accounts
(Hartmann-Wendels et al., 2009), but usually refers to opening new accounts in the customer’s
name (Malphrus, 2009). Such frauds not only have a high impact on the profitability, but also
it creates a negative impact on bank-customer relationship (Hoffman &Birnbrich, 2012), due
to lost trust & confidence (Krummeck, 2000). The customer brings the fraud in notice of bank
staff, blocks and reopens or reissues a new account or card and finally, takes the big charge of
dispute to recover its financial losses (Douglous, 2009). All these hassles lead to increased
dissatisfaction because of perceived service failure (Varela-Neira et al., 2010).
(iii) Advances Related Frauds
Frauds related to the grant of credit facilities account for the largest share in total value of
frauds in Indian banking sector. In the words of Mr. J.P. Dua, Chairman and Managing
Director, Allahabad Bank, “The maximum number of frauds is pertaining to fake title deeds.
It is a major area of concern for all banks”. In his article (Patil, 2013) has reported that public
sector banks, because of submission of fake documents, have suffered a loss of Rs. 8734 crores
in the last 3 years.
When the customer himself plays the game of cheating or forgery, then the damages are even
bigger. In the cases, where the amount involved is greater than 50 lakhs, the fraudster or
embezzler is “opportunist’s type”. These embezzlers take advantage of the weaknesses of the
internal controls and use its deficiency for their own benefit (Smith, 1995). An ineffective
internal control (Khanna & Arora, 2009), stressed employees and readily available computer
technology adds to the opportunities of fraud (Haugen and Selin, 1999). Hence its prevention
has become a major area of concern for the banks as well as public policy makers (Sullivan,
2010).
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2.4 Theme 3: New types of frauds in today’s Banking industry
With the range of payments becoming ever greater over the world, everyone needs to be aware
of the coherent steps that should be taken to minimize the chances of being an online fraud
victim. Being an victim of fraud can cause stress and worry, so taking measures to protect
yourself is essential. Some common online banking scams are (SINGH, 2013):
1.Phishing: This is the name given to e-mails that claim to be from your bank or other
organizations but are actually sent to you by fraudsters. These e-mails typically urge you to
click on a link that takes you to a fake website identical to the one you would expect to see.
You are then asked to verify or update your personal information but, by doing so, you are
actually giving your information to the fraudster who has created the fake website. The
fraudster then uses the details to access your online bank account and take your money. One
easy way to spot phishing e- mails is that they are usually addressed to “Dear valued customer”
instead of your name. This is because phishing e-mails are usually sent out at random as the
fraudsters only have limited information such as e-mail address. In a similar scheme, called
“Vishing”, a person calls you and pretends to be a bank representative seeking to verify account
information.
Figure 5. Phishing
2.Pharming: Pharming is the installation of malicious code on your computer without any
acknowledgement on your part. In one type of pharming attack, you open an e-mail, or an e-
mail attachment that installs malicious code on your computer. Later, you go to a fake web site
that closely resembles your bank or financial institution links whereas with pharming, you have
to open an e-mail, or e-mail attachment, to become a victim. You then visit a fake website and,
without your knowledge, provide information that comprises your financial identity.
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Figure 6. Pharming
3.Malware: Malware (malicious software) is a computer virus that can be installed on your
computer without your knowledge. It is capable of monitoring your PC activity, enabling
fraudsters to capture your passwords and other personal information. To be a malware victim,
you must be tricked into performing actions you would not normally do. You have to install
the malware on your computer either by running a program or by visiting a website through e-
mail or instant message link. Then, you are requested to send your bank login information.
Your financial information will then be at risk only after you perform all these steps. To make
sure you do not become a victim of malware, make sure you have up-to-date anti-virus and
anti-spyware software installed.
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Figure 7. Malware
4.Money Mules: Money mules are people who accept fraudulently obtained money into their
account, and then withdraw the money and transfer it overseas to a fraudster. Money mules are
often innocent people who have been deceived into helping criminals transfer funds abroad.
Criminals offer prospective mules the chance to earn some easy money – concealing the fact
that the work is illegal by advertising the job as a “shipping manager” or “sales manager” for
an overseas company.
Figure 8. Money mule case.
5.Identity Fraud: This fraud involves criminals obtaining key pieces of personal information
that they use to pretend to be you. Criminals use these personal details to obtain financial
services products in your name such as credit cards, loans, state benefits and documents such
as driving licenses and passports. Alternatively criminals can use your personal information to
gain access to your existing accounts.
25
Figure 9. Identity Fraud.
6.Skimming:It is a fraudulent collection of payment card details using typically a small

electronic device called skimmer. The device most times is affixed to an ATM or Point-of-Sale
terminals and allows criminals to capture customer's card information including PIN. The
advent of wireless technology has made it easier for criminals to remotely download stolen
data without physically visiting the terminals.
Figure 10.How Skimming is done.
26
7.Sim Swap fraud: In this type of fraud the mobile number of a customer is hijacked through
bogus sim replacement at a mobile outlet/agent. The fraudster then uses the mobile line to
access the mobile banking by receiving sensitive details like PIN through PIN reset request.
Ways to fight and fight e-Fraud Transaction security is a complex challenge that requires
concerted efforts from all stakeholders in the payment space to be effectively dealt with. The
counter-fraud story isn't all about direct financial loss. Shrinkage or loss due to shoplifting has
long been in the budgets of high street retailers and just as in online, there is a balance to be
had between securing stock and allowing customers the freedom to purchase.
Figure 11.How Sim Swap fraud is executed
27
2.5 Theme 4:Survey of Literatures
Calderon and Green (1994) made an analysis of 114 actual cases of corporate fraud published
in the Internal Auditor between 1986 and November 1990. They found that limited separation
of duties, false documentation, and inadequate or nonexistent control account for 60 percent of
the fraud cases. Moreover, the study found that professional and managerial employees were
involved in 45 percent of the cases.
Barnes (1995) has pointed out that the quality training to bankers helps not only in developing
job related skill but also maximizes the performance potential of bankers and provides them
the sound knowledge and understanding of banking practices and principles. Imparting training
is of paramount importance in this regard. Ganesh and Raghurama (2008) believe that training
improves the capabilities of employees by enhancing their skills, knowledge and commitment
towards their work.
Haugen and Selin (1999) discussed the value of internal controls. 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. There are many other reasons for
employee fraud, the more common being revenge, overwhelming personal debt, and substance
abuse. Business today is very competitive, and employees often stressed. As a result, they have
a feeling of being overworked, underpaid, and unappreciated. If employees are also struggling
with serious personal problems, their motivation to commit fraud is very high. Adding to the
situation of poor internal controls, the readily available computer technology also assists in the
crime, and the opportunity to commit fraud becomes a reality.
Beirstaker, Brody, Pacini (2005) proposed numerous fraud protection and detection techniques.
These various techniques include fraud policies, telephone hotlines, employee reference
checks, fraud vulnerability reviews, vendor contract reviews and sanctions, analytical reviews
(financial ratio analysis), password protection, firewalls, digital analysis and other forms of
software technology, and discovery sampling.
Research of Khanna & Arora (2005) indicated that lack of training, overburdened staff,
competition, low compliance level (the degree to which procedures and prudential practices
framed by Reserve bank of India to prevent frauds are followed) are the main reasons for bank
frauds.
Bhasin (2007) examined the reasons for cheques frauds, the magnitude of frauds in Indian
banks, and the manner, in which the expertise of internal auditors can be integrated, in order to
detect and prevent frauds in banks. He emphasized that though the head of the branch holds
the responsibility for ensuring adherence to prescribed systems and procedures, the bank's
internal auditors also occupy a special position in the detection and prevention of frauds. In
addition to considering the common types of fraud signals, auditors can take several proactive
28
steps to combat frauds. Checking frauds requires training, account screening, signature
verification and information sharing with regulators and local authorities. One important
challenge for banks, therefore, is the examination of new technology applications for control
and security issues.
Smith (1995) offered a typology of individuals who embezzle. He indicated that embezzlers
are “opportunist type”, who quickly detects the lack of weakness in internal control and seizes
the opportunity to use the deficiency to his benefit.
Willson (2006) examined the causes that led to the breakdown of Barring bank, in his case
study: “the collapse of Barring Banks”. The collapse resulted due to the failures in
management, financial and operational controls of Baring Banks. The failures that were evident
include the following areas:-
• Failure in management supervision

• Lack of segregation between front and back offices of Baring Futures, Singapore.
• Insufficient actions taken by Barring’s management in response to warning signals.
• No risk management or compliance function in Singapore
• Weak financial and operational control over the activities and funding of Baring Futures
Singapore at group level.
Banking fraud hurts both banks and their customers. Banks incur substantial operating costs
by refunding customers’ monetary losses (Gates and Jacob, 2009). This, in turn, may
negatively affect customer loyalty and stimulate switching behaviour (Rauyruen and Miller,
2007), thereby hurting the banks’ reputation and impeding the attraction of new customers
(Buchanan, 2010).
29
2.6 Theme 5 : Deloitte’s Survey on Indian Banking Fraud Survey Edition III,2018 India
In Deloitte’s Survey, when the respondents were asked about the areas where they have
encountered fraud and the root cause analysis of the incidents. Their response revealed that in
banking sector majority of the fraud incidents are encountered in Retail banks followed by the
Corporate Banks.
Figure 12: The Frauds Encountered in Financial Sector (Area wise)
In this survey 77% of the respondents indicated that they When the respondents were asked
about the factors have suffered from fraud in retail banking. The other responsible for increase
in number of frauds, they cited major area appears to be corporate banking as indicated by
"lack of oversight by line managers or senior management 57% of the respondents. on
deviations from existing process/controls" along with only 33% of the total respondents have
shown that they have faced fraudulent practice in private sector lending whereas Treasury and
Administration / procurement have appeared as an area least prone to frauds. (Fig. 12)
"Difficult business scenarios" and "Business pressure to meet targets" appear to be some of the
significant factors contributing to the fraud incidents. It is interesting to note that 37%
respondents have also identified "lack of tools to identify Red Flags" as one of the factors. (Fig.
13)
30
Figure 13: Factors Responsible For Bank Frauds
It is obvious about 73% of the respondents mentioned "lack of oversight by line managers or
senior managers on deviations from existing process/controls."
With retail banking appearing to be the most vulnerable to fraud, it is interesting to see that the
respondents have indicated high to very high incidents of frauds encountered by them involving
multiple funding, overvaluation/non- existence of collateral, besides fraudulent documentation.
Frauds due to incorrect sanctioning processes and external vendor fraud are also some of the
fraud prone areas. An intriguing revelation of this survey is that even though many of the banks
outsource the verification and valuation process to third party vendors, the percentage of
respondents identifying external vendor induced fraud appears to be relatively low.
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Figure 14: Fraud incidents in Retail Banking
According to survey conducted by Deloitte it has become obvious that majority of the fraud
incidents are still detected through formal or informal complaint mechanism. Almost 53%
respondents in this survey revealed that they detected fraud through internal audit reviews.
However in 20% cases it was detected by accident and another 43% were by anonymous
complaints by third parties. This indicates that a significant number of frauds are detected by
third party despite various anti- fraud measures implemented by banks.
Figure15: Fraud Detection Mechanism
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As per RBI Circular 2009, Banks are required to take help from skilled manpower to investigate
large value frauds as it requires specific skill sets like forensic accounting and technology to
collect evidences which may not be available internally. They are also required to take internal
punitive action against the staff and external legal prosecution of the fraudsters and their
abettors. However, there are only 3% of the respondents going in for an external investigation
and lack of forensic technology tools as indicated below, there could be a possibility of
evidence getting lost during this period.
Figure 16: Response to Fraud Incidents
Despite the fact that majority of the banks have implemented a fraud control organization
structure, number of frauds are rising which brings into question the effectiveness of the
fraud risk management framework at the banks. The reason for complete implementation of
all these framework controls could possibly be because of the fact that many banks are in the
early stages of implementation of the framework and these are work in progress.
33
2.7 Theme 6: Study of Gaps existing in controlling/countermeasures against frauds
There are two main sources of frauds in banks and these are the internal and the external.
Though distinguishable in theory, these sources are very often inseparable in practice. Major
causes of fraud can be categorized as follows:
i. Poor Management
This comes in a form of inadequate supervision. A junior staff with fraudulent tendencies that
is not adequately supervised would get the impression that the environment is safe for the
perpetration of fraud. Poor management would also manifest in ineffective policies and
procedures, which a fraudulent minded operator in the system will capitalize on. Even where
there are effective policies and procedures in place, fraud could still occur with sometimes
deliberate skipping of these tested policies and procedures.
ii. Inexperienced Personnel
Inexperienced personnel are susceptible to committing unintentional fraud by falling for

numerous tricks of fraudsters. Inexperienced personnel are unlikely to notice any fraud
attempts and take necessary precautionary measures to checkmate the fraudster or set the
detection process in motion.
iii. Overstretching
Overstretching is another reflection of poor management. This can aid perpetration of fraud to
a large extent. A staff who is overstretched is not likely to perform at optimum level of
efficiency.
iv. Job rotation
Ordinarily, the longer a man stays on a job, the more proficient he is likely to be. An operator
who has spent so long on a particular job may be encouraged to think that no one else can
uncover his fraud. The existence of this kind of situation in a bank is clear evidence of poor
management and such situations encourage fraudulent practices.
v. Poor remuneration
Poor salaries and poor conditions of service can also cause and encourage fraud. Employees
that are poorly paid are often tempted to fraudulently convert some of the employers’ monies
to their own use in order to meet their personal and social needs. This temptation is even
stronger on bank employees who on daily basis have to deal with cash and near cash
instruments. In our society, it is argued that greed rather than poor working conditions or poor
salaries is what lures most people into fraudulent acts. This explains why fraud would still exist
in the banking sector, which is reputed to be one of the highest paying sectors. Some people
34
have an insatiable appetite to accumulate wealth and would therefore steal irrespective of how
good their earnings are.
vi. Frustration
Frustration could also lead to fraud. Where a staff feels short-changed in terms of promotion
and other financial rewards, they become frustrated and such frustration could lead to fraud as
such employee would attempt to compensate himself in his own way.
vii. Inadequate Training and Re-Training
Lack of adequate training and retraining of human resources both on the practical and
theoretical aspects of banking activities and operations more often than not leads to poor
performance. Such inefficient performance creates a loophole which can very easily be
exploited by fraudsters.
viii. Poor Book-keeping
Inability to maintain appropriate books of accounts together with failure to reconcile the
various accounts of the bank on daily, weekly or monthly basis more often than not will attract
fraud. This loophole can very easily be exploited by bank staff that is fraudulent. The
prevalence of fraud and forgeries are an indication of weakness in a bank’s internal control
systems. Aside the above- mentioned causes of fraud, the following factors greatly contribute
to fraud:
Inadequate compensation, salaries and fringe benefits which are accruable to bank staff Refusal
to comply with laid-down procedures without any penalty or sanction; Conspiracy between
interacting agents charged with the responsibility of protecting the assets and other interest of
the bank;
2.8 Theme 7 : Adverse Effects of frauds other than monetary losses:
1.Non-financial Losses:
PWC (2011) in Global Economic Crime Survey found out that organizations that have
performed fraud risk assessments have detected and reported more fraud. As it is quite evident
from the Figure 17 that Productivity loss(45%) & Reputational loss(39%) accounts for the
biggest losses in the event of frauds in organizations.
35
Figure 17. Non-financial losses suffered as a result of incidents of fraud
2. Loss of Public Confidence in Banks
Fraud is perhaps the most fatal of all the risks confronting banks. The enormity of bank frauds
can be inferred from its value, volume and actual loss. A good number of banks’ frauds never
get reported to the appropriate authorities, rather they are suppressed partly because of the
personalities involved or because of concern over the negative image effect that disclosure may
cause if information is leaked to the banking public The banks’ customers may lose confidence
in the bank and this could cause asset back in the growth of the bank in particular. Losses from
fraud which are absorbed to equity capital of the bank impairs the bank’s financial health and
constraints its ability to extend loans and advances for profitable operations. In extreme cases
rampant and large incidents of fraud could lead to a bank’s failure.
3.Increased Operating Cost
Fraud can increase the operating cost of a bank because of the added cost of installing the
necessary machinery for its prevention, detection and protection of assets. Moreover, devoting
valuable time to safeguarding its asset from fraudulent men distracts management. Overall, this
unproductive diversion of resources always reduces outputs and low profits which in turn could
retard the growth of the bank.
4.Low Asset Quality
It also leads to a diminishing effect on the asset quality of banks. The problem is more
dangerous when compounded by insider loan abuses. Indeed, the first generation of liquidated
banks was largely a consequence of frauds perpetrated through insider loan abuses. If this
problem is not adequately handled, it could lead to distress and bank failures.
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5. Diversion of Public Funds from Banks to Alternative avenues(Bhasin 2007):
If bank would not handle the ever increasing cases of frauds and contained them then public
might divert their funds & deposits to other investment instruments such as :
a) Stock Market.
b) Mutual fund house.
c) Gold.
2.9. Theme 8: Technological innovation to address gaps and preventing frauds in future
1.Blockchain technology: The Blockchain is a bookkeeping system that functions on

connected computers recording every transaction. Every transaction made over blockchain
platform is visible and traceable, if need be. For easy comparison, blockchain is just like ledger,
we use to maintain day to day transactions with the only difference that it needs no middlemen
for registering the transaction details. By incorporating blockchain technology to their
accounting information systems and cyber security strategy, banks could reduce cyber fraud
risk by maintaining a clean, secure database and a strengthened control system.
How does Blockchain help fight fraud?

The Blockchain has a complex functionality wherein digital records combine into blocks, and
such blocks make a chain cryptographically and chronologically connecting network with each
other through sophisticated mathematical algorithms. Each block has a unique set of records
with a connection to the previous one. Any new block is added to the end of the blockchain
only.
The process of encryption is known as hashing and is performed by ‘n’ numbers of computers
across the network. Each block computes the same digital calculation and has its unique digital
signature. Once a new block is registered, the participant gets notice of the same. The
information on this block cannot be changed or altered. The participants can only add value to
the existing old information. (Dai, Wang and Miklos A. Vasarhelyi, 2017)
37
Three Applauding Features Of Blockchain That Help Prevent Fraud
Figure 18. Features of Blockchain that help prevent Fraud
Any party can participate in trading and contribute to the verification of transactions based on
pre-encoded rules; the validated transactions are then posted on the blockchain ledger. Once a
transaction is posted and confirmed, the entries related to it will be cryptographically sealed
and shared with the entire chain. This makes falsifying or destroying records to conceal fraud
activities practically impossible. (Tejal shah, Shailak Jani, 2018).
38
Figure 19.Blockchain process.
39
Figure 20. Blockchain Decoded ( Source: Tejal shah, Shailak Jani, 2018)
2. Neural Network:
This technology is mostly used in credit card frauds. The inherit nature of neural networks is
the ability to learn is being able to capture and represent complex input/output relationships.
The motivation for the development of neural network technology stemmed from the desire to
develop an artificial system that could perform "intelligent" tasks similar to those performed
by the human brain. Neural networks resemble the human brain in the following two ways:
1. A neural network acquires knowledge through learning.

2. A neural network's knowledge is stored within inter-neuron connection strengths known as
synaptic weights. The true power and advantage of neural networks lies in their ability to
represent both linear and non-linear relationships and in their ability to learn these
relationships directly from the data being modeled. Traditional linear models are simply
inadequate when it comes to modeling data that contains non-linear characteristics.
40
Figure 21. Neural network.
Credit card fraud detection using neural networks relies on the human brain operating principal.
Neural network technology can make a computer capable of thinking. Credit card fraud
detection with a neural network is possible due to the ability of the neural network to solve
classification problems. The human brain learns through experience. This technology works
similarly. When customers use a credit card, they create a fixed pattern. This pattern is later
used in the classification. (Wei Jinjiu Li·Longbing Cao, 2012)
The neural network is trained to detect credit card fraud by using historically collected data.
This data contains information such as the card holder’s profession, income, credit card
number, transactions of larger amount of money, frequency of transactions, location of where
purchases take place, information about the kind of purchases made before with the credit card
(e.g. grocery store, gas stations, hotels, specific restaurants, etc.), issue date of the card. Using
this data the neural network decides whether a particular transaction is being made by the
cardholder or not. When a credit card is being used, the system compares the information about
the transaction with the information saved during previous uses. If the data matches the pattern,
then it is almost certain that the card is used by its owner. If there isn't any match, that doesn't
mean certain fraud, but the possibilities for fraud increase significantly.(Madan Lal Bhasin,
2017).
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3. Artificial intelligence (AI):
Account opening fraud can be difficult to detect because it is often tied to data breaches at other
banks, meaning banks do not yet have the data necessary to recognize illegitimate customers.
This is where Artificial intelligence (AI) and Machine language (ML) technologies can come
in handy. Banks can use ML and AI to better analyze and understand customer behavior,
providing them with more robust views of how legitimate customers act. This approach relies
on algorithms to identify users based on available data, and the amount and type FIs can collect
for fraud protection is critical to these technologies’ success. Such algorithms could be used to
better determine fraud risk before a customer’s application is accepted or declined, too. (Dahee
Coi, Kyunghu Lee,2018).
Figure 22.Artificial Intelligence.
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2.10 Literature Conclusion
From the review of the literature it can be concluded that frauds can basically be classified into
three main types: Technology related, KYC related and Advance related. In the last decade
there is exponential rise in technology related frauds such as Phishing, Pharming, Malware,
Money Mules, Identity Fraud, Skimming, Sim-Swap etc. There are many gaps in present
banking system in combatting these frauds such as lack of proper training of employees, poor
internal control, overburdened staff, low compliance level, involvement of internal employees,
weak risk management policies. Moreover, from the survey conducted by Deloitte on Indian
banks, it can be concluded that the most important factors responsible for bank frauds were
lack of oversight by line managers followed by business pressure imposed by higher authority.
In addition to this , apart from monetary losses to banks due to frauds, there are certain other
non-financial losses also such as reputational loss, productivity loss, loss of public confidence,
increased operational cost, low asset quality, diversion of public funds to other investment
instrument such as stock market, mutual fund, gold etc. Banks should also keep updating their
systems and softwares at regular intervals to ensure they does not become obsolete. In addition
to this, quality training to banking staff is very much needed. This training not only helps in
developing job related skills but also maximizes the potential and performance of bankers and
provide them sound knowledge and understanding of banking practices and principles to curb
against banking frauds.Finally, bank has to innovate new ways by exploiting technology to
combat frauds such as AI (Artificial Intelligence),Neural network, Blockchain technology etc.
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CHAPTER 3
3. Research Methodology
The research methodology which has been followed is both descriptive and analytical in nature.
The research is qualitative in nature which is based on questionnaire-based survey conducted
among bank employees of India .It will be structured into two parts. The first part will
comprised of questions that will be related to banking operations, different kind of trainings
on how to combat fraud ,how aware they are with the procedures & guidelines set up by
regulator, awareness level towards frauds and their compliance level in different banking
transactions. The second part will address the issues about how to curb fraudulent practices
and bring back the customer confidence in Indian banking industry. It will also examine how
technological innovation can be integrated to combat banking frauds in Indian banking
industry.
3.1 Proposed methodology
According to Somekh and Lewin (2005) research methodology is defined as not only
collection of proper rules to carry out any research but also principles and theories on which
particular approach is based. This part provides the brief information about the methodology,
has been utilised as a part of research.
3.2 Research design
The research design will be based by following the model given by Saunders et al.(2009)
known as “ Research onion”. Different kind of layers can be found in this “research onion”.
To reach deep into the core part the research process, these layers of onion has to be peeled
one after the other starting from the outermost layer.
44
Figure23. The Research Onion, Saunders et al. (2009)
3.2.1 Research Philosophy
Research philosophy is the outermost layer of research onion regarding which according to
Saunders et al(2009) consist of assumptions which are necessary and helpful in choosing the
correct research strategy and methods involved.
Subjectivism
The philosophy of subjectivism will help to understand the frauds in Indian banking industry
and its prevention to boost up confidence of customer in banks. Subjectivity helps in research
in many ways such as choosing the relevant topic, formulation of hypotheses, selection of
methodologies and interpretation of collected data. In this research work subjectivist
philosophy is chosen because of the reason that the nature of the frauds in banking industry is
ever changing and very dynamic. Banking habits of today’s customer is totally different what
it has been 20 years ago. Hence, because of the change in banking habits and attitude ,the nature
45
of fraud has also been drastically changed with the course of time. In other words it is implied
that the relationship between bank and customer is not constant because of increasing frauds.
It keeps on changing with the type of fraud and what counter action is taken by regulator and
bank against it
Interpretivism
There have been many criticisms of positivism which define “laws” in the same way as physical
sciences in the complex social world of business and management. As a result of this
researchers may tend to side with interpretivism. Interpretivism advocates that it is necessary
for the researcher to understand the differences between humans in our role as social actors.
As humans we play at part on the stage of human life whereas in theatres actors play a part
which they interpret in a particular way and act out their part in accordance with their
understanding of this role. We as individuals carry this out in the same way in our everyday
social lives. (Saunders et al, 2012 pg. 137) Unlike positivists, interpretivists hold the view that
the social world cannot be understood by applying research principles from natural sciences.
(Blumberg et al, 2011 pg. 17) The main principles of interpretivism are the social world is
constructed with a meaning from people, the researcher is part of what is observed and research
is driven by interests.
In this research the individuals have their own consciousness and give rational responses as
they are the part of practical banking industry. They are not mere puppets who react to external
social forces as positivists believe.
3.2.2 Research approach
The next layer of the research onion is the type of research approach. In general there are
mainly two types of research approaches which are inductive research and deductive research.
Inductive approach
An inductive argument is radically different from a deductive type as it does not have the same
relationship between reasons and conclusions. (Blumberg et al, 2011 pg. 21). A Qualitative
research strategy is regarded as inductive as data collection is used to explore a phenomenon
and identify themes, patterns to create a conceptual framework. (Saunders et al, 2012 pg. 163)
In this research work, the researcher will be using the inductive approach to study the frauds
in Indian banking industry. The reason for choosing inductive approach for this study is
because this is more suited to qualitative research by collecting data from conducting different
interviews with bank officials. This approach will help the researcher to get an excellent
opportunity to deeply understand the banking industry. Inductive methodology gives a practical
understanding of the issue (Saunders et al. 2007). The questions that are framed mostly starts
with “How”, “What” “and “Does” etc so that ground reality can be deeply understood for
which inductive approach is more suitable. The other reason to use inductive approach is the
46
purpose of this research study will be to move individual perception in explaining general
patterns. (Collis and Hussey, 2009).
Deductive approach
Deductive approach is usually followed in case of Quantitative research which is based on

using data to test theory. According to Bryman and Bell (2015 pg. 23), deductive theory is the
most common view of the relationship between theory and research which the latter is
conducted with reference to hypotheses and ideas inferred from the former. This theory
basically relies on approach as that of some scientific research. It simply involves the
development of the theory that is then subjected to a rigorous test through a series of
propositions.
3.2.3 Research Strategy
The next level in the research onion is looking at the research strategy. Blumberg et al (2011
Pg. 501) defines research design as the blueprint for fulfilling research objectives and
answering the research questions. It’s the generic plan of how you will go about answering
your research question Saunders et al, 2012 pg. 143)
Jankowicz, (2005 pg. 198) says the research strategy can be classified into three types:
exploratory, descriptive and causal. Bryman & Bell (2015 pg. 37) describes the research
strategy as a framework for the collection and analysis of data and that the choice of the
research strategy reflects decisions about the priority being given to a range of dimensions of
the research process. Saunders et al (2012 170) state that the nature of the research project will
also be either exploratory, descriptive, explanatory or combination of them.
In this research to find out “ different kinds of frauds in Indian banking industry and appropriate
measures to curb these fraudulent practices to boost trust of customer for efficient banking
system”, the researcher has used different strategies based on case studies and grounded theory.
The questions framed for case study will be starting with “why”, “what”. “how” etc. will have
the potential to get the deep understanding of the banking industry. In this research, semi
structured interview was conducted. The answers obtained from these questions enabled the
researcher to find out the answer of the research question.
47
3.2.4 Research Choice
The research choice is the next layer of research onion. It is broadly classified into two types-
Quantitative research and Qualitative research.
Quantitative Research
Quantitative Research is generally associated with positivism, especially when used to

predetermined and highly structured data collection techniques Saunders et al 2012 pg. 162. In
addition, Bryman and Bell (2015 pg. 727) states that quantitative research usually emphasizes
quantification in the collection and analysis of data. Blumberg et al (2011 pg. 144) simply
states that quantitative research studies rely on quantitative information like numbers and
figures. The normal strategies used in this research design are experimental and survey research
conducted through questionnaires or structured interviews.
Qualitative Research
Qualitative techniques are a fundamental approach of exploration and analysis, including in-
depth interviews, participant observation, videotaping of subjects Blumberg et al (2011 pg.
144). Qualitative research is associated with an interpretive philosophy (Denzin and Lincoln
2005) , this is due to the researcher needing to make sense of the subjective and socially
constructed meanings Saunders et al (2012 PG 163).
For the purpose of this paper, the research will adopt qualitative case study research. Given the
nature of the case study, the researcher believes a single data collection technique, in other
words a mono method is to be employed for the data collection. An In-depth interview will be
used as the mono-method to seek qualitative information from the respondents. “In- depth
interviews are a useful qualitative data collection technique that can be used for a variety of
purposes, including needs assessment, program refinement, issue identification, and strategic
planning.
A 360 degree analysis was conducted by interviewing banking officials .In depth 5 interviews
were taken. To get the macro and the wholesome view of the entire Indian banking sector
,different categories of banks will be considered from range of public and private banks under
sub-categories of large sized, mid-sized and small sized banks(categorize on the basis of market
capitalization and balance sheet of banks). In-depth interviews are most suitable for
circumstances in which one needs to ask open-finished inquiries that evoke profundity of data
from moderately few individuals. (Guion L, Diehl D, and McDonald D, 2011).
48
3.2.5 Time Horizon
The next layer of the research onion refers to the time horizon of the study. An important part
of the research is “Do I want my research to be a “snapshot” taken at a particular time or do I
want it to be more akin to a diary or series of snapshots. Saunders et al (2012 pg. 190) there
are two types of time horizons which are cross-sectional “the snapshot horizon” or longitudinal
“the diary outlook”.
Longitudinal study is repeated over an extended period of time, tracking changes in variables
over times Blumberg et al (2011 pg. 495). The main strength of this study is its capacity to
study change and development. It is long running study not really designed for dissertations at
a master’s level.
Cross-Sectional is the study conducted only once and reveals a snapshot of one point in time
Blumberg et al (2011 pg. 490). For the majority of research proposals they will fall under cross-
sectional as the study of a particular phenomenon at a particular time. This study will fall under
cross sectional as the project undertaken is under time constrain. A cross- sectional study
engages the collection of data on more than one case at one specific time in order to collect
quantitative or quantifiable data when more than one variable is considered (Bryman and Bell,
2015 pg. 62).
As in this particular research the time was limited, so this research selected cross sectional
study. A cross-sectional study draws in the collecting data on more than one case at one
particular time with a specific end goal to gather quantitative or quantifiable information when
more than one variable is viewed as (Bryman and Bell, 2003).
3.2.6 Data Collection Method
Since this research work is investigative in nature and hence qualitative method has been
followed. Moreover, since interviews were conducted for collection of data, which is non-
numeric research technique so qualitative method is used rather quantitative one. As we know
that there are two types of data collection methods: primary data collection and secondary data
collection. Both of them has been elaborated below:-
Primary Data Collection
Primary data for the research has been collected by conducting interviews. A 360 degree
analysis was conducted by interviewing banking officials. This has also help in minimising the
probability of errors while doing research work. Fraud related data are secret for the banking
organizations. Therefore there is no officially declared authentic secondary source from where
these data can be obtained. Data for this study has been gathered from the primary sources of
the referred bank. The respective persons in the departments which handles fraud related data
49
has been personally interviewed. The name of the bank, the departments and the number of
persons involved in each department has been kept withheld for security reason.
The main objective of the research is to study the frauds prevailing in Indian banking industry
and how to curb fraudulent practices so that increase trust of customer for efficient banking
system. Interviews were conducted with bank officers and executives who are having vast
experience in different departments and verticals of banking sector. This was done through
telephonic conversation. Some of the questions which researcher has planned in relevant to the
research topic are as follows:-
banking sector?
frauds in banks?

unreported?
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Secondary data
Secondary data is the data which is available to be accessed in public domain. Hence, in this
research secondary data has been collected from annual reports of banks, banks’ circulars’ on
frauds, articles, academic journals ,books and websites which are relevant to banking fraud and
its prevention.
3.2.7 Sampling
According to Field (2005), A Sample is "a littler gathering of units from a population utilized
to decide truth/facts about that population”. Sampling method has been broadly categorised
into two types: probability sampling and non-probability sampling. The first method is
probability sampling. It is generally used in research methods where survey is used. The second
one is the non-probability which is also known as judgemental sampling. It basically provides
the scope for option strategies in choosing the tests in case of researcher subjective judgment.
In this research work, since researcher is going to use qualitative technique and hence non-
probability sampling method will be used. In India there are more than 50 banks operating at
present, so it is quite obvious that the size of banking sector is very huge. Hence, it becomes
almost impossible to take view from every banking fraternity. Moreover, there is constraint of
time and budget because of which samples will not be randomly selected or distributed.
3.2.8 Research Ethics
While doing this research, following ethical principles has been followed:
• Obtain informed consent from potential research participants;
• Minimized the risk of harm to participants;
• Protect their anonymity and confidentiality;
• Avoid using deceptive practices; and
• Given participants the right to withdraw from your research.
• To ensure there is no fabrication, falsification or misrepresentation of data obtained.
• Self-bias or self- deception is avoided
• Discrimination on the basis of sex, race, ethnicity or other factors has been avoided.
3.3 Research limitation
The identification of limitations and reducing them to minimum is one of the important feature
of any good research work. The focus of the research is confined to Indian banking industry
and hence it cannot be generalise to other countries of the world .One of the most challenging
part of this research is management of time. Since the interviewees were mostly bank
managers, so it will be very difficult to get their spare time. Moreover, it is not possible to take
51
face to face interviews because the researcher and interviewees are residing in different
countries. Hence, Interviews were conducted via telephonic conversations. So, the body
language while answering questions could not be observed. Some of the facts and figures were
not disclosed by the interviewees as those information was supposed to be confidential to the
organisation.
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Chapter 4
4. Data analysis
In this section, the findings and analysis of the dissertation work will be discussed on the basis
of the data collected by all the 5 interviewees who have ample experience and expertise in
banking sector. The researcher will try to find out answers of research questions.
4.1 Methodology of research
A 360 degree analysis has been done by conducting in depth interviews with 5 bankers from
Indian banking industry. The researcher has tried to take interviews from banks of different
capacity such as large, mid-size and small banks. Also banks belongs to both category- Public
Sector and Private Sector . These categorization was necessary to make sure to understand the
holistic and overall situation of complete Indian banking industry. The interviewees has
exposure to different verticals and departments in bank such as retail banking, corporate
banking, treasury & forex etc. The interviews were conducted via telephone. Each interviewee
had been given the form which explains the objective of the research. The questions were open
ended which gives the interviewees express their own views freely. All the interviewees were
asked the same set of questions to make the researcher able to find out the answer to the
research question.
4.2 Participants Information
a. Participants Gender
All of the five participants were male.
b. Participant details
The details of the participants who were interviewed during the research is given below:
• Participant position: Branch Head

Work experience in banking industry: 9 years.
Name of the Bank: “A” Bank.
Country: India.
• Participant Position: Manager(IT)

Name of the bank: “S” Bank.
Country: India.
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• Participant Position: Senior manager(Treasury & Forex)
Work experience in banking industry: 11 Years.
Name of the bank: “I” Bank.
Country: India
• Participant Position: Deputy General Manger

Name of the bank: “B” Bank
Country: India
• Participant Position: Manager (IT)

Name of the bank: “H” Bank
Country: India
4.3 Interviews
Five interviews were conducted during the research. All of the interviewees are posted at
managerial level or above in scheduled commercial bank in India. All the five interviewees
work in different banks and have knowledge of wholesome banking as they have the experience
of working in different verticals of banking like- retail banking, treasury, trade finance,
corporate banking, SME banking etc.
The most important thing that researcher done before conducting interview was to do
homework thoroughly that is going through annual reports of respective bank so that
researcher have some prior knowledge about bank which would eventually facilitate quality
discussion during interview as well as precise data can be added in dissertation work. The
detailed interview conducted with each banker has been attached in Appendix B.
54
Chapter 5
5. Discussion and Conclusion
5.1 Introduction:
In this section the researcher will try to analyze his research work to find answer to the research
question. The most important thing that researcher done before conducting interview was to do
homework thoroughly that is going through annual reports of respective bank so that
researcher have some prior knowledge about bank which would eventually facilitate quality
discussion during interview as well as precise data can be added in dissertation work.
The researcher had conducted interviews to complete the primary research of the dissertation.
All the interviewees are professionals in the field of banking have ample experience.
5.2 Comparison/Contrast of Interview answers and Literature review & Researcher

interpretation:
A summary of answers given by the interviewees and what the researcher concluded from
his research and how they are related in line with literature review studies is discussed
below:-
banking sector?
Comparison/Contrast: All of the participants had agreed that their banks are impacted by the
frauds. But the impact differs from bank to bank. For instance “A” bank has lost around Rs
3000 Crores in last financial year. Banker from “I” bank told that their bank has lost around
200 Crores in 2018-19 due to skimming attacks. One of the biggest public sector bank in India,
“B” bank has lost around whopping Rs.6000 Crores due to forex scam which was very much
55
in limelight in business newspapers, as told by very senior official of the bank. In addition to
this, the banker from the largest private sector bank, ”H” told the researcher that their bank’s
balance sheet has been dented by amount of Rs 4500 crores due to frauds. According to “S”
bank, around Rs 150 crore has been lost due to this vishing(Fake calls) frauds in last financial
year.
Literature review and Researcher interpretation: As is quite evident that different bank has
given different figures on what is the magnitude of frauds in their banks. After going through
deep study on annual reports of respective banks what researcher found that the magnitude of
frauds is different in different banks probably because of the size of the balance sheet of bank.
Larger the bank is, so would be its customer base & hence the number of frauds & amount
involved will be huge. Mostly in India State bank of India(SBI) group and other public sector
banks are the larger banks. Hence no. of cases of frauds & amount involved is relatively larger.
This is also quite evident while the researcher has already mentioned during literature
studies(Chakrabarty 2013) of regulator bank (Reserve bank of India Report-2010-2013). It is
crystal clear from the below data (Pie Chart) that no. of cases of frauds in nationalized banks
is around 55 % & amount involved is whopping 83 %.(www.rbi.org.in)
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(Source: www.rbi.org.in)
frauds in banks?
Comparison/Contrast: According to banker from “A” bank, “Well during my vast banking
career I would say that in earlier times fraud were mainly related to Advance related or KYC
related where customer used to provide Fake/Forged documents, however, now things has been
changed in last couple of years and frauds are mainly related to technology related. Talking
about sources of these frauds I would say most of the advance related & KYC related frauds
are originated within the country from the States of Uttar Pradesh & Bihar. While in case of
Technology related frauds spammers are generally originated from China & Pakistan.”
Similar views were expressed by banker from “S” bank. He told the researcher that “Well, if
you will talk about amount related to frauds then largest amount of frauds are related to advance
related frauds particularly mortgage loans where forged documents are presented to bank.
However, now a days, although, ticket size of amount involved in technology related frauds
are low but number of incidents are very high. Innocent customers falls prey to phishing
attacks(fraudulent e. mails) which are mostly generated from the countries like China,
Bangladesh, Venezuela, Nigeria etc.” However, It is quite interesting to know that banker from
“I” bank has slightly different point of view on how these frauds are originated. He told the
researcher that technology related frauds are increasing day by day. One of the main sources
of increasing frauds in Indian banking industry is the increasing availability of fake mobile
apps at google play store and apple store. Most of the fraudsters are now tech-savvy and they
have the expertise in designing these fake apps which mimics exactly the same as original apps
in design and usage. It is very difficult for the customer to differentiate and they erroneously
downloads the fake apps and start doing banking transactions. Hence, banking credentials of
the customers get share with fraudsters.
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In addition to this, banker from “B” bank comprehends the problem with different angle. He
told the researcher that, “I would say that the main cause of increasing frauds in banks is
paradigm shift in the way banking is done today. The customer is shifting from brick-mortar
branches to online banking. The transformation has taken place without proper knowledge &
necessary precautions while doing online transactions. Although it is more convenient for the
customers, but, they are not as tech-savvy as fraudsters. So, Fraudsters exploit these loopholes.
Moreover, technology is very dynamic and evolving everyday, so banks’ softwares and
systems installed today becomes obsolete tomorrow. Because bank has limited resources and
money to keep updating its technology and system regularly, their system becomes prone to
Viruses, Malwares, Phishing etc.”
The most interesting reply was given by banker from “H” bank. It was totally different from
all other bankers. According to him, “One of the prime reasons would be there is sudden and
tremendous increase in banking business in India. The number of nationalized bank branches
increased from 8200 in 1969 to more than 64000 in 2009. The sudden expansive explosion has
created a vacuum of properly trained and experienced persons. New recruits often do not have
adequate training or experience before they are put in responsible positions, which they handle
irresponsibly. Secondly, I would say that the life has become too fast. The banker does not
have enough time to scrutinize documents thoroughly as magnitude of work-load has increased
drastically. Lastly and probably the most important is related to “moral hazard” .The moral
values are falling. “Quick Buck” has become the new goddess of the public. Bank frauds offer
convenient access to the goddess.”
Literature review and Researcher interpretation: The interviewees gave different answers
to this question. However, they were of the common opinion that if you we about amount
related to frauds then largest amount of frauds are related to advance related frauds particularly
mortgage loans where forged documents are presented to bank. However, in recent times,
although, ticket size of amount involved in technology related frauds are low but number of
incidents are very high. The researcher also thinks that due to changing habits of customers in
last 2 decades, technology related frauds are increasing. Although, if we wound compare
amount involved in frauds then still advance related frauds has the lion share. This is same in
line with literature review studies. Frauds related to the grant of credit facilities account for the
largest share in total value of frauds in Indian banking sector. In the words of Mr. J.P. Dua,
Chairman and Managing Director, Allahabad Bank, “The maximum number of frauds is
pertaining to fake title deeds. It is a major area of concern for all banks”. In his article (Patil,
2013) has reported that public sector banks, because of submission of fake documents, have
suffered a loss of Rs. 8734 crores in the last 3 years. Banks which are lenient in observation
(Sharma & Brahma, 2000) and fulfilling the KYC requirements are preyed with such threats.
They either do not submit proper documentation or submit stolen documentation. Since banks
have been trying to focus on providing alternative channels to the customers, other the physical
branches, as a part of ‘branchless banking’, it has left some holes providing space to fraudsters
(Bhutto &Janjua, 2011).
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So researcher after having discussion with banker & different studies of literature concluded
that bank has to take two-pronged approach to deal with nuisance of fraud : 1.They have to
make their employees trained to distinguish between real & fake documents & 2.To update
their system & softwares at regular interval to make sure they are not obsolete.

Comparison/Contrast: While answering this question different bankers has different point of
view, although all of them have unanimously agreed that there are many gaps in present
banking system. According to “A “Bank, Banker gaps were : Poor Management ;
Inexperienced Personnel ; Inadequate Training and Re-Training of Staff ; Lack of robust &
updated software & technology. Banker from “S” bank has added that lack of coordination
among different public sector and private sector banks on information related to fraud related
is another bottleneck in our banking system. Banker from “I” bank has taken the discussion to
another level. According to him, one of the biggest hurdles is to prove fraudster guilty in court
of law. Bankers are not experts in legal paperwork, and formal complaints against fraudsters
drafted by them often lack incisiveness. This results in very low conviction rate for fraudsters
(less than 1 percent of total cases) Also, lack of strong whistle-blower protection law inhibits
early detection in case of involvement of internal employees. “H” bank also has similar point
of view and told the researcher very important information that as per judicial law in India,
wilful defaulter is still not considered as a criminal offence. Hence, Fraudster take undue
advantage of these means of evasion and commit maligned activities without risk of conviction.
However, according to banker from “H” bank, “Indifference and knowledge gap are two basic
factors responsible for the gaps in effective control. Indifference develops a lack of team-spirit
and motivation among employees and leads to casual attitude towards their responsibilities.
They do not evince any interest in knowledge and skill required and do not update the various
instructions periodically circulated by the corporate office, which ultimately turns out to be
breeding ground for frauds.”
Literature review and Researcher interpretation: The researcher can inferred from the
discussion that all the bankers agreed and aware of the gaps in present banking system. They
understand the gravity of the matter & every bank is doing their level best to address these gaps
which are under their control. However, certain loopholes such as legal constraint is something
which cannot be avoided. This is also quite evident from the literature studies. Research of
Khanna & Arora (2005) indicated that lack of training, overburdened staff, competition, low
compliance level (the degree to which procedures and prudential practices framed by Reserve
bank of India to prevent frauds are followed) are the main reasons for bank frauds. Haugen and
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Selin (1999) discussed the value of internal controls. Ganesh and Raghurama (2008) believe
that training improves the capabilities of employees by enhancing their skills, knowledge and
commitment towards their work.
unreported?
Comparison/Contrast: While answering this question all the participants have given the
similar response. All the banks are having dedicated a web based portal known as Customer
Grievance Redressal Cell, aimed at providing the customers with a platform to lodge their
grievances such as frauds & has been provided on the Bank's website, under Customer Care.
In addition to this, every bank has also appointed Internal Ombudsman for obtaining an
impartial view of the customers' grievances.
Literature review and Researcher interpretation: All the bankers told the researcher that
their bank follow the policies and procedures laid down by the regulator bank, Reserve bank
of India to lodge the complaint which can be found at website: www. rbi.org.in. After the
completion of interview the researcher went through website provided and studied in detail
the process & procedure which can be summarized below:-
Fraud detection procedure in public sector banks: The researcher analysed the process of
fraud detection and reporting in a public sector bank and who are the various players
involved in this process. Following is a step by step illustration of the same. (Figure 24).
1. First, a fraud is internally reported to senior management of a bank. It also be reported

to vigilance department of the bank.
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2. If reported to the vigilance department of the bank, it investigates the fraud and then
reports it to both senior management as well as the central vigilance commission (CVC)
to whom they are required to report monthly.
3. Although CVC can report fraud directly to investigating agencies like CBI, usually final
decision to either report fraud to an external agency or to deal with it internally is made
by senior management of the bank. Depending upon size of the bank, amount of money
involved in fraudulent activity and number of third parties involved, senior
management may choose to deal with the fraud internally or file an FIR and report it to
either local police or CBI.
4. A committee of the RBI also independently monitors fraudulent behaviour in banks and
reports its observations on quarterly basis to central board of the RBI. The board may
then report the matter to either central vigilance commission or ministry of finance
(MoF).
5. Auditors, during the course of their audit, may come across instances where
transactions in accounts or documents point to possibility of fraudulent transactions in
accounts. In such a situation, auditor may immediately bring it to the notice of top
management and if necessary to audit committee of board (ACB) for appropriate action.
Figure 24.Flow Chart depicting procedures post Fraud Detection and

Reporting in Banks
(Source: www.rbi.org.in)
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Table 6.Current Structure for filing Police/CBI complaints in
fraudulent cases
Comparison/Contrast: The participants differ in answering this question also. “A” bank is
encountering new kind of malware which attack on the main server of our bank. As a
consequence of this many debit/credit cards were cloned. In “S” bank there were recent cases
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of frauds were reported where social media platform such as Facebook, WhatsApp, Twitter
etc. were used. In case of “I” bank, Skimming attacks were the real headache. Also in “B”
bank cases of Phishing, Malware attacks, Skimming etc. are quite common. However, recently
their bank has encountered new type of fraud known as Sim Swap fraud. It was interesting to
know that In “H” bank , recently has got many complaints from customers of incidents of newer
way of committing fraud known as Identity Fraud.
Literature review and Researcher interpretation: Various literature studies done also found
newer ways of committing these frauds. Beirstaker, Brody, Pacini (2005) proposed numerous
fraud protection and detection techniques. These various techniques include fraud policies,
telephone hotlines, employee reference checks, fraud vulnerability reviews, vendor contract
reviews and sanctions, analytical reviews (financial ratio analysis), password protection,
firewalls, digital analysis and other forms of software technology, and discovery sampling. The
researcher concluded from the discussion that, in general, bankers have ample knowledge in
the field of banking ,however they are not tech-savvy & lack IT related knowledge. Probably,
when they started their banking career, these technology related frauds seldom occurred.
However, as per discussion with them, the researcher found that their bank is investing
substantial amount of money on IT training & updated softwares to combat these kinds of
frauds.
6.How your bank is implementing new technological innovation to combat frauds?
Comparison/Contrast: Every bank is trying to implement new technological innovation to

combat frauds. Different bank has adapted different strategy to execute their plans. Banker’s
told the researcher to go through their Bank’s 2018-19 annual report to get in-depth knowledge
of the initiatives taken by each bank. For instance “A” bank has set up its Cyber Security
Operation Centre (CSOC) with twelve major security solutions to detect, monitor and manage
cyber security events to protect its IT assets and combat frauds. ”S” bank’s data Centre is now
equipped with nine layers of security. Also, Network Access Control (NAC), has been
implemented for protection from Cyber Attacks in addition to existing services like Anti-Virus
to minimize incidents of frauds. In case of “I” bank, they have adapted very exhaustive and
comprehensive approach. The approach covers all aspects of prevention, detection and
response. The Bank also conducts and participates in cyber security drills to continuously fine
tune its response mechanisms. In order to detect and prevent cyber incidents, the “B” Bank has
upgraded its Captive Security Operations Centre to Cyber Security Operations Centre (C-SOC)
which operates on a 24x7 basis. It was quite surprising to know that ”H” bank has already
started to bring next-gen technology into play namely, Artificial Intelligence (AI) to combat
fraudulent activities in their bank.
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Literature review and Researcher interpretation: Literature review shows how new
technology such as Artificial intelligence(Dahee Coi, Kyunghu Lee,2018)., Blockchain
technology(Tejal shah, Shailak Jani, 2018). & Neural network(Madan Lal Bhasin, 2017). can
be exploited to combat frauds. The researcher was quite satisfied and convinced that every
bank is upgrading their systems & softwares and taking many initiatives in the field of
technological innovation to combat frauds.
Comparison/Contrast: Every bank has different risk management policies to address

fraudulent activities. For instance, in case of “A” bank ,the Bank has also identified certain
areas as 'Zero Tolerance Areas' & 'Fraud Sensitive Area' Inspection and Audit Policy, RBIA
Module, Management Audit Format have been modified / reviewed by the Operational Risk
Management Committee/ Head office Audit Sub Committee/ Audit Committee of the Board/
Board of Directors of the Bank. The Bank has also separate Vigilance department which
focuses on identifying the areas prone to frauds. Similar response has been given by “S” bank.
Their Bank’s Internal Audit function provides an independent view to its Board of Directors
and Senior Management on the quality and efficacy of the internal controls, risk management
systems( See below figure). “I” bank has dedicated Information Technology Strategy
Committee ensures that information technology strategy is aligned with the business strategy
to monitor and minimize fraudulent activities. The senior banker from “B” bank elaborated
main type of risks in banking sector: Credit Risk, Market Risk & Operational risk. According
to him we can’t avoid risk but we can only minimize it. To mitigate these risk their bank follows
3 step process: a).Identify ,b).Measure and c).Control. For this, their bank has implemented a
web-based Operational Risk Management system called SAS Enterprise Governance, Risk and
Compliance (EGRC) for systemic and integrated management of risk. While having discussion
with banker from “H” bank, he told the researcher that their Bank has enhanced its cyber
security protocol by enhancing data protection and cyber defense measures. The Bank also
widened coverage of Security Incident and Event Management (SIEM), which provides a
comprehensive and centralized view of the security scenario of IT infrastructure. Also,
Firewalls were upgraded to Next Generation with deep packet inspection (DPI) ability.
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Figure 25.Risk Management Structure of Banks (Source: From Annual report 2018-19 of
“S” Bank)
Literature review and Researcher interpretation: PWC (2011) in Global Economic Crime
Survey found out that organizations that have performed fraud risk assessments have detected
and reported more fraud . As per RBI Circular 2009, fraud risk management &fraud
investigation function must be owned by Bank CEO, it’s Audit Committee and special
committee of the board. Banks are required to take help from skilled manpower to investigate
large value frauds as it requires specific skill sets like forensic accounting and technology to
collect evidences which may not be available internally. Also, Willson (2006) examined the
causes that led to the breakdown of Barring bank, in his case study: “the collapse of Barring
Banks”. The collapse resulted due to the failures in management, financial and operational
controls of Baring Banks. Hence, researcher can conclude that every bank has robust risk
management system, however, the problem is in the implementation part. This is also quite
evident from the literature studies done by Haugen and Selin (1999) in which it has been
discussed the value of internal controls. 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. There are many other reasons for employee fraud, the more
common being revenge, overwhelming personal debt, and substance abuse. Business today is
very competitive, and employees often stressed. As a result, they have a feeling of being
overworked, underpaid, and unappreciated. If employees are also struggling with serious
personal problems, their motivation to commit fraud is very high. Adding to the situation of
poor internal controls, the readily available computer technology also assists in the crime, and
65
the opportunity to commit fraud becomes a reality. Also, according to the literature review
already discussed in Theme 5 : Deloitte’s Survey on Indian Banking Fraud Survey Edition
III,2018, the studies has concluded that “Despite the fact that majority of the banks have
implemented a fraud control organization structure, number of frauds are rising which brings
into question the effectiveness of the fraud risk management framework at the banks. The
reason for complete implementation of all these framework controls could possibly be because
of the fact that many banks are in the early stages of implementation of the framework and
these are work in progress.”
Comparison/Contrast: None of the interviewees had answered this particular question as it

is a confidential data of the bank. But one thing they all have told to researcher with
conviction that their bank is taking this issue very seriously and they are investing sizable
amount of money on research and technology to combat frauds.
Researcher interpretation: After having discussion with all the bankers, what researcher
concluded that certain information is very confidential to any bank. So they are not
authorized to share such information in Public domain. However, researcher can definitely
say that every bank is spending heavily on R&D and technology to combat frauds as they
already know that the future of banking will be technology based.
Comparison/Contrast: Every banker agreed that increasing cases of frauds brings negativity
and loss of trust of customer. Every bank is doing something different from others to bring this
trust again. For example “A” bank has built new cyber security framework which work around
five fundamental areas including Identify, Protect, Detect, Respond and Recover. Bank has
also augmented it cyber security capabilities during current year by deploying Website Anti-
Phishing monitoring solution. “S” bank is very proactive to bring this trust back again by
bringing AI(Artificial Intelligence) based email segregation for Complaint Resolution, which
understands and identifies customer’s queries and directs them to the targeted desk. Also,
Machine Learning and Natural Language processing, is in progress. In case of “I” bank they
has developed unique 4D framework which focuses on: 1.Delivery with speed & accuracy;
66
2.Decongestion; 3.Digitisation; and 4.Delivery with empathy. It was very interesting to know
that “H” bank has launched EVA (Electronic Virtual Assistant) across all our digital channels.
Customers can chat with this virtual assistant 24x7 and easily obtain the information they need.
Today, EVA, through seamless integration with Google Assistant and Alexa, offers our
customers ease of accessibility. In addition to this banker from “B” bank told the researcher
that “As you know that future of banking industry lies on how well your bank is well equipped
with latest technology. To bring trust & confidence of our customer we believe in out of box
thinking & are taking many innovative steps such as: Setting up of Security Operation Centre
(SOC) so as to improve cyber security posture of the bank and to achieve an effective cyber
security shield against numerous threats to Bank's IT Asset on a 24x7x365 basis, a full-fledged
Cyber Security Operation Centre (CSOC) has been set up by the Bank at its Data Centre.”
Literature review and Researcher interpretation: According to literature review studies

(Bhasin 2007) there is strong probality of diversion of funds to other financial instruments such
as Gold, Stock Markets, Mutual funds etc. if public trust is lost. The researcher can interpret
from the discussion that no bank can afford to lose trust of customer. This would be the horrible
condition of failure of banking industry. So every bank is utilizing their resources to the
maximum and bringing something which requires out of box thinking to lure the customers.
Comparison/Contrast: As quoted by the banker from “A” bank, “What I feel there is a deep
relation between incidents of frauds, trust of customers and future of banking. If we are able to
contain ever increasing cases of frauds by exploiting technological advancement on our bank
we are definitely sure that we are going to have an edge over our competitor banks & eventually
we will be able to retain the trust of our customer. This is quite evident from our latest financial
results that as we have invested heavily on enhancing our cyber-security, the deposits of our
bank has increased by whopping 16%.” Similar point of views has been expressed by banker
from “S” bank. He told the researcher that, “Well in today’s competitive banking sector
customer is the king. So it become utmost important that customer has confidence om our bank
that their hard earned money is in safe hands. To facilitate it, every bank has to take futuristic
measures to counter the ever increasing cases of frauds. So we are investing heavily on
technological upgradation of obsolete systems and softwares . Also we used to conduct many
ongoing campaigns on educating our customers on how to avoid frauds and cyber-attacks.”
However, the correlation and the real connection between fraud, trust and future of Indian
banking industry has been elaborated by banker from “I” bank. According to him, “Increasing
reliance on technology and digitization increases the risks of cyber-attacks including computer
viruses, malicious or destructive code, phishing attacks, denial of service or information,
67
ransomware, unauthorized data access, attacks on personal emails of employees, application
vulnerability and other security breaches. This could negatively impact the confidentiality,
integrity or availability of data pertaining to the Bank and its customers. The Information
Technology Strategy Committee oversees cyber security related threat landscape and the
Bank’s preparedness to address these from a prevention, detection and response perspective.
The Bank also lays emphasis on customer elements and has invested in the areas of phishing
protection, adaptive authentication, awareness initiatives and has also taken industry-leading
initiatives in providing customers with an easy and immediate ability to configure their risks
and limits.”
It was quite interesting to know that a very senior banker from “B” bank told that the most
important thing to succeed in long term for any bank is “Public trust”. According to his point
of view, “Well, I am not denying the fact that due to increasing cases of frauds , somewhere
we are losing public trust. I believe that the most important thing in bank is Public trust. If you
lose trust of public, you will lose capital/deposits and if you will lose capital, then your bank
is finished. That will be the horrible situation for any bank. So bringing trust and integrity of
public on banks are the most important thing. We are the custodian of public money. So it is
our moral responsibility to take care of public money with honesty and integrity. To make our
bank future-ready it has implemented state-of-the-art Data Centre tools for Network
Management at its Data Centre and branches/offices. In addition, the Bank has also
implemented application performance management for synthetic monitoring of internet
banking and core banking applications. The Bank has set up two IT centers of excellence to
build a future ready organization.” Banker from “H” bank opined similar point of view. This
was quite evident from what he has quoted, “Well, whole banking industry depends on two
important factors: Trust & Confidence. It is the very trust and confidence that public deposit
their hard earned money to bank. The relationship between fraud and trust is inversely
proportional. The more vulnerable the bank is to frauds, the lesser trustworthy bank will be.
Technology is the future of banking. To make our bank future ready & combat frauds regular
tests are conducted to assess the vulnerability of the IT infrastructure and applications and
remedy where necessary are routine. As are anti-phishing services that help in shutting down
phishing sites and protecting the customers from fraud.”
Literature review and Researcher interpretation: In general all the bankers were trying to
convey that whole banking industry depends on two important factors: Trust & Confidence. It
is the very trust and confidence that public deposit their hard earned money to bank. The
relationship between fraud and trust is inversely proportional. The more vulnerable the bank
is to frauds, the lesser trustworthy bank will be. This is also quite evident from the literature
studies: Frauds not only have a high impact on the profitability, but also it creates a negative
impact on bank-customer relationship (Hoffman & Birnbrich, 2012), due to lost trust &
confidence (Krummeck, 2000). Banks are the custodian of public money. So it is our moral
responsibility to take care of public money with honesty and integrity. Technology is the future
of banking. Every banker told the researcher that to make their bank future ready & combat
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frauds regular tests are being conducted to assess the vulnerability of the IT infrastructure and
applications and remedy where necessary are routine. Moreover, every bank is investing
heavily on technological upgradation of obsolete systems and softwares . Also all the bank
used to conduct many ongoing campaigns on educating our customers on how to avoid frauds
and cyber-attacks
As per the researcher on the basis of interviews and literature studies it can be concluded that
“trust” and “confidence” are the most important thing in banking industry. If we would
compare India with other developed countries we will find that saving propensity of the people
in India is relatively higher. This is quite evident from the OECD Report 2019,according to
which household saving rate in India stood at 17.2 % as compared to USA at 7%,Eurozone at
5% and of Canada as low as 1.69%. One of the prime reasons for this high savings in India is
“insecurity in people after retirement”. The Indian government does not provide pensions to its
citizens. Hence, Indian public used to save money for their post retirement age. That is why
people become skeptical and lose the trust very quickly on banks if they come to know about
any fraud.
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5.3 Conclusion of objectives:
The dissertation aims at fulfilling following four objectives:-
1. To understand nature and extent of frauds, and their impact on the Indian
banking system.
2. Assess effectiveness of controls / countermeasures currently prevailing in Indian
banking industry.
3. To determine areas where gaps exist in controls/countermeasures.
4. To assess potential role of technology in addressing these gaps.
Objective 1: To understand nature and extent of frauds, and their impact on the Indian
banking system
The survey results have been analysed and deduced, the results show that all the five
interviewees agreed that their bank has been deeply impacted by frauds in their respective bank.
Although number of cases & amount involved in fraudulent cases differs drastically. Nature of
frauds also differs from bank to bank: be it advance related or KYC related or technology
related. The biggest impact of this ever increasing cases of frauds is monetary losses and dent
on the balance sheet of bank. However, apart from monetary losses, according to PWC (2011)
in Global Economic Crime Survey found out that there has been non-financial losses as well
such as productivity loss, reputational loss, loss of public confidence & trust, increased
operation cost, low asset quality. In addition to this, as per studies done by Bhasin(2017),
consequences would be the diversion of public funds to other investment instruments such as
stock market, mutual fund house and gold.
As per researcher based on literature review and response from interviewees it can be
concluded that number of cases and amount involved in frauds in different bank is different
because of the different customer base of different banks. This is quite evident by studying the
annual reports of relevant banks. Every bank has different exposure to deposits and loans
portfolios. Due to different financial & non-financial losses, bank could loss public trust &
confidence .As a result of this public will refrain themselves to keep their hard money in banks.
This would be the horrible condition & the complete failure of banking system. The of failure
of banking industry will have domino effect on other industries also as most of the large
corporate loans are financed by banks only. This would badly impact and dent the Indian
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economy. However, after having discussion with different bankers, the researcher concluded
that every bank is taking this matter very seriously and have taken many pro-active steps to
combat and minimise fraudulent activities in future.
Objective 2: Assess effectiveness of controls / countermeasures currently prevailing in

Indian banking industry
While assessing the effectiveness of different controls/countermeasures currently prevailing in

Indian banking industry, interviewees differs in their responses and approach. However, all the
bankers agreed that their present system and procedures are not fully equipped in controlling
the fraudulent activities. As per discussion with different bankers, every bank is abide by the
system and procedures laid down regulator bank(Reserve Bank of India).Moreover, every bank
has their own dedicated Risk Management System and Vigilance department for controlling
and minimizing the incidents of frauds. This is also quite evident from literature studies done
by Haugen and Selin (1999),which discussed the input of internal controls and risk
management system for the effective controls of frauds.
While having discussion with different bankers, they told to researcher to go through website
of regulator bank website: www.rbi.org.in to find out the detail system and procedure followed
by banks. The researcher studied it and concluded that present system followed in banks in
effective control of frauds is not fool-proof and have many loopholes which are exploited by
fraudsters. Moreover, the procedure is very lengthy and time-consuming. In addition to this,
researcher has also found that bank’s IT system and softwares are not robust and capable
enough to combat frauds and they should be updated at regular interval of time to ensure they
does not become obsolete.
Objective 3: To determine areas where gaps exist in controls/countermeasures.
Having studied literature reviews and response from bankers, researcher concluded that there
are many gaps in present banking system in combatting frauds. As quoted by different bankers
some of these are poor management, inexperienced employees, inadequate training of staff,
lack of robust and updated softwares & technology, lenient and lengthy Indian judicial laws
against fraudsters etc. This is also quite evident from literature review such as studies
conducted by Khanna & Arora(2005) , which indicated lack of training, overburdened staff,
low compliance level etc. Barnes (1995) has pointed out that the quality training to bankers
helps not only in developing job related skill but also maximizes the performance potential of
bankers and provides them the sound knowledge and understanding of banking practices and
principles. Imparting training is of paramount importance in this regard. Ganesh and
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Raghurama (2008) believe that training improves the capabilities of employees by enhancing
their skills, knowledge and commitment towards their work.
On the basis of all these facts and studies, researcher concluded that there are many gaps in
present banking system which needs to be addressed without wasting any time. There should
be trainings and orientation programs for the banking staff at regular interval of time to make
them aware of fraud prevention measures. Moreover, law against willful defaulters and
fraudsters should be made a criminal offense which is present a civil offence.
Objective 4: To assess potential role of technology in addressing these gaps
Whether we like it or not, Technology has deep penetration in every sphere of life. Banking
industry is no exception to this. The future of banking will be technology- driven. The
responses from the interviewees and literature studies also support that investment in
technology is the way forward to curb frauds. As per discussion with different bankers,
researcher concluded that every bank is investing substantial amount of money in technological
innovation. Every bank has dedicated Cyber Security Operation Centers. They are also
implementing future technology such as Artificial Intelligence(AI), Blockchain technology and
Neural network. This is also quite evident from the literature review studies. Literature review
shows how new technology such as Artificial intelligence(Dahee Coi, Kyunghu Lee,2018).,
Blockchain technology(Tejal shah, Shailak Jani, 2018). & Neural network(Madan Lal Bhasin,
2017). can be exploited to combat frauds.
Hence, researcher finally concluded that future of banking depends on technology. The success
or failure of any bank in future will depends on how they adapt to new technology and
innovation. Gone are the days of brick-mortar branches, future is virtual(online) banking.
Every bank has to adapt out of box approach, which is completely different and unique to other
competitive banks to get an edge in combatting future frauds in today’s very competitive and
customer-centric banking industry.
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Final Conclusion :
The impact of frauds on entities like banks, which are engaged in financial activities, is more
significant as their operations involve intermediation of funds. The economic cost of frauds
can be huge in terms of likely disruption in the working of the markets, financial institutions,
and 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. Amidst the continuous upliftment
of the technology implemented at the backend of the financial institution, some essential
aspects were overlooked that now demand huge attention.
To have robust and effective fraud control mechanism in place it is imperative for the banks to
keep reviewing their operations and gather market intelligence on the new fraud scenarios to
understand their operations vulnerability to fraud. However, it should be noted that market
intelligence plays a key role in understanding new fraud schemes in the market and banks may
need to employ mystery shopping exercise to understand the weakness in their system. So for
a meaningful fraud risk assessment, banks should look at increasing their market intelligence
capabilities or seek external help. 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 the manager and staff should be improved so that proper information about
frauds 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. A policy
of compulsory leave in a month should be introduced so as to unveil the unscrupulous deeds
performed by corrupt officer in charge. Signature is always vulnerable to forgery therefore
thumb impression should be introduced along with signature To ensure that fraud controls
remain effective, responsibility for the organization's fraud risk management should be
delegated to a person at the senior level who can interact with various departments like internal
Audit, Vigilance and Risk Management. Fraud management solutions aligned to evolving
consumer attitudes and behaviors towards security can help financial institutions in their efforts
to gain market share and minimize fraud losses. In addition to this, every bank need to make
huge investment in technology so that they have robust IT infrastructure & Cyber security
centers to combat and minimize frauds in future. Finally, only by working in partnership with
their customers can financial institutions develop truly effective fraud prevention efforts.
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5.4 Recommendations for Future:
1. There are considerable delays in reporting frauds to appropriate authorities, conducting

investigation and fixing of accountability, which in effect leads to shielding of the main
culprit while the blame is shifted to the junior level officials. This trend needs to be
curbed immediately. Close liaison must be maintained with investigating agencies and
courts to ensure timely completion of investigations and closure of cases.
2. Society should demand stringent action against the perpetrators of financial frauds and
should socially ostracize them.
3. Banking system should collectively ensure that the fraudsters do not have access to
banking facilities.
4. Training and Orientation programs must be conducted for the employees by the banks.
The employees must be made aware about fraud prevention measures.
5. There should be cooperation among nations to avert cyber-crime. Cyberspace being

transnational in nature requires cooperation among different countries to work together
to avert cyber-crime.
6. Employing multipoint security like two-factor authentication, introduction of digital

signature on high value transaction, capping addition of beneficiaries, sending SMS
alerts in case of any transactions in the account etc. on internet banking transactions.
7. Adopting upgraded technology solutions like converting all strip based cards to chip
based cards, velocity checks on number of transactions effected per day/per
beneficiary, capturing internet protocol check as an additional validation check for any
transaction, etc.
8. The unrestricted use of social media websites at the office exposes a company to
higher fraud risk. A little IT expert , with even little time and effort, can easily gather
sufficient information about a company, its employees, vendors, suppliers, buyers and
other related parties. This captured information can be used in a negative manner.
Hence, companies should try to keep a check of the usage of these websites on official
systems.
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9. Banks should constantly educate the general public about the types of embezzlement
happening around them. It needs to constantly seek awareness through print media,
electronic media and emails, cautioning customers not to fall prey to the false
promising statements.
10. Adhering to the reporting guidelines issued by the RBI. To put a check, RBI has asked
all the banks to report cases involving an amount of Rs. 1 lakh and above to the police.
The public sector lenders to report any case of Rs. 1 crore and above to the Central
bureau of Investigation. A considerable delay has been noticed in declaring the fraud
cases. It has to kept in mind that longer the delay, larger the time in given to fraudsters
to defraud its mischief and time to erase the trail of its wrong doing.
11. Bank need to employ well scrutinized employee. A background check is must to
ascertain if the prospective employee has any criminal record or dubious background.
Apart from keeping an eye on the new hiring, a job rotation of existing ones is required.
Keeping too long at one place gives him/her confidence and experience to perpetuate
the fraud unnoticed.
12. Surprise audits can be done, to avoid the embezzlement by the internal employee.
Checking of cashiers, reconciliation and balancing of accounts at different branches,
stock-taking of security stationery, checking of different registers etc. are the various
measures aimed at fraud detection.
13. A proper internal control audit may be devised on a half yearly or annually basis which
goes through each and every detail of the activities of the branch.
14. The data collection mechanism in banks is very archaic and needs a revision. The banks
should employ the best available IT systems and data analytics in order to ensure
effective implementation of the red flagged account (RFA) and early warning signals
(EWS) framework suggested by the RBI, which would help in a better profiling of
customers by analysing patterns of their transactions and rendering a near real time
monitoring possible for banks.
15. Strong punitive measures for third parties: The government should consider examining
the role of third parties such as chartered accountants, advocates, auditors, and rating
agencies that figure in accounts related to bank frauds, and put in place strict punitive
measures for future deterrence. There is also a case to be made to question the
certification/credentials of third parties like auditors to decide their competence in
evaluating accounts containing potentially fraudulent entries.
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16. Law against wilful default and fraudsters should be made a criminal offence. It is
currently a civil offence under Indian law, whereas it is a criminal offense in other
countries.
17. Ground intelligence assets: Banks should be equipped with some intelligence gathering
agency, which might be deployed to track activities of borrowers and is able to help
the bank in ensuring real time compliance and early detection of fraud. A special fraud
monitoring agency should be setup in banks with highly skilled/trained officials.
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Chapter-6
Reflection & Learning
6.1 Introduction
This part of this dissertation simply explains the researcher’s journey from the start of this
MBA program right through to the end of the dissertation, the learning styles that helped in the
development of this dissertation. Self- reflection is an important part of everyday life as people
often reflect on past experiences.
6.2 Learning Style
Learning is broken into a four stage cycle described by Kolb, A. D (1984) pg. 21 they are as
follows the concrete experience which is to simply evaluate and test abstract concepts. The
second stage observations and reflections are simply reflecting on the stage before, observing
the concrete experience someone has done. The abstract concepts and generalizations which is
the third stage in the model which analyses where ideas originated from, retrieving conclusions
from these ideas. The fourth stage of the learning model testing implications of concepts in the
new situation is testing the new ideas drawn up and seeing if they work.
The learning model relates to the dissertation where from the start the word of “Fraud”
appeared. The researcher then began to read articles, newspapers journals and books around
the Frauds in banking industry, particularly Indian banking sector and how it was changing the
financial services industry which all forms generalizations and an analysis of this topic.
Figure 26. Kolb’s learning cycle.
77
“Learning is the process whereby knowledge is created through the transformation of
experience” (Kolb, 1984).
According to the Kolb cycle, the four learning stages which include:
1. ◼ Concrete experience: This is mainly about doing and having the experience of an
activity.
2. ◼ Reflective observation: This involves reviewing the experience and a further
reflection considering success and failures in the activity.
3. ◼ Abstract Conceptualisation: The is the application the theory to the activity and
concluding.
4. ◼ Active experiment: Planning for future activities using previous experiences.
Learning is a continuous practice and individuals learn in many ways. Peter Honey and Alan
Mumford based on the learning cycle of Kolb identified further four learning styles and
preferences which include: Activist, Theorist, Pragmatist and Reflector
(https://www2.le.ac.uk/departments/doctoralcollege/training/eresources/teaching/theories/hon
ey-mumford)
◼ Activist: This is an individual who learns hands on, they have a receptive way of learning
which is simply self-inclusion.
◼ Theorist: This individual is bent on ideas, theories, models to comprehend the hypothesis
behind activities. Simply enjoys theoretical studies.
◼ Pragmatist: This individual prefers to put conceptual idea into real practice, their main
mode of action involves experimenting ideas and making speculations.
◼ Reflector: This individual abstains from ‘jumping in’ and watch, observe from the side
lines, gathering alternate views and information enough to make suitable conclusions.
78
Figure 27. Peter Honey and Alan Mumford learning styles. Source: (Honey & Mumford,
1986)
6.3 Self-Analysis of Researcher
Based on the Honey and Mumford questionnaire developed in 1982 to understand the different
learning styles particular to individuals, the researcher realised his learning style is towards
both the pragmatist and reflector styles. The researcher prefers to however put conceptual ideas
into real practice, experimenting new ideas and making sense of it however he does not
necessarily ‘jump in’, but observes curiously from the side lines gathering alternate views to
make conclusions of his own. The learning cycle based on the learning style of the researcher
as agreed is at reflecting on actions and putting theory into practice planning the next step.
Kolb’s learning cycle says that after learning has occurred, it is important to reflect upon those
experiences and analyse. The researcher would like to begin this reflection process with the
79
reason for pursuing MBA. The researcher previously worked as a Branch Manager in
Government Bank in India. The role expected him to handle branch, team management,
generation of new business to bank in both the core department of bank, deposits & advances,
achievement of monthly targets allotted by higher authorities, selling of third party products
such as insurance & mutual funds etc. Since he was from engineering field working in the
financial sector & hence he was determined to fill the gap of formal education in finance to
further excel his career in financial field. There is an analytical nature inherent to MBA’s.
The dissertation process and the Peter Honey and Alan Mumford learning styles helps the
researcher to understand his learning style and an insight about himself. He can now
understand about the way he look at things, learn new concepts, his behaviour and the reason
for his behaviour. He can now say that he is primarily a Pragmatist and then a Reflector. As a
Pragmatist, he is very keen on applying the knowledge derived from his education in real life
The learning style has led the researcher to reflect upon the times he have stood back and take
the time to observe things. He always questioned his work. He looked for support through his
supervisor, he was in touch with him constantly and asked for his feedback on regular interval.
Initially researcher faced a problem with literature review. Since the topic is very vast, so it
was very difficult where to start from. This was when Mr. Enda Murphy, guided him towards
how to start my research work by guiding him on frauds in Indian banking industry, what are
the gaps in present system & how to address these gaps/countermeasures. He used DBS library
to access such reports through EBESCO Discovery service.
6.4 Learning & Development
The most rewarding learning comes from the primary research. Although the topic required in
depth reading, it was arranging the interviews through networking and persistence that was a
worthwhile experience. Conducting the interviews played a significant part in my personal
development meeting new people, gaining different insights and cultures from different
corporate levels. How one individual views the world is an interesting platform as opposed to
another. One of the most important skills the researcher learned was to adapt to each different
interviewer with a variety of alternative questions if the interviewer was a little short on the
main semi structured questions.
Learning from colleagues wasn't another eye opener to the masters. Liaising with other students
and discussing how to approach different strategies to conducting research and structuring their
work was a very rewarding. Learning from peers and others with experience is vital to anything
80
we do in life. College in general taught the researcher that building cohesive relationships with
peers and creating a networking platform was one learning curve that will not be forgetting.
6.5 Planning & Preparation
“By failing to prepare, you are preparing to fail.” ― Benjamin Franklin
Planning and preparation is essential to the majority of everything we do in our lives. Benjamin
Franklin's statement couldn't be truer when it comes to conducting a research project like a
dissertation. As the paper discussed above one of the main research limitations was the short
time in which the dissertation had to be completed in. Therefore planning and preparation was
going to prove challenging. Dublin Business School has students well prepared as lectures
handed out small research assignments throughout the course preparing us for what lay ahead.
The exams which incurred at the end of each semester was another vital stepping stone to
preparing students to plan ahead with studying and research required within each module.
This led to the researcher developing time management and planning skills when organizing
interviews for the dissertation which can be extremely challenging. Preparing a diary to plan
for the months ahead of the research was one of the most important factors as the researcher
had to try balance the dissertation with part-time job.
6.6 Application of learning in the future
The researcher has learnt a lot and developed through the whole MBA process and the
dissertation inclusive. Skills developed have helped him accomplish this degree program and
will also be very relevant in his future career.
A. Professional Skills- career direction
The MBA program has been very tasking and demanding for the researcher. This has helped
the researcher understand the expectation of the professional world and prepared appropriately
towards it. The banking industry is ever changing and as mentioned earlier this change is
largely due to technological advancements and so the requirements of this thesis has helped
develop the researcher’s mind professionally.
B. Research Skills
This is a skill developed from the first lecture at DBS through to the dissertation process and it
is a very important skill. From assignments to literature review all involved thorough research
and an understanding of what the text in correlation with what the researcher intends to write
about. Research to the author is simply a well thought, time consuming and demanding process
and the researcher has gained this skill from working with a well-structured time plan.
C. Critical thinking skill
81
This is a skill developed directly from research. As mentioned research is cumbersome and
time consuming and the ability to interpret obtained data or information into a well-suited work
involves a critical thinking process. The researcher has particularly developed this skill from
the whole period of the MBA program at DBS.
D. Interpersonal and leadership skills
The format of the MBA program entailed group projects and interactive classes. The author
developed these skills from numerous group work done which required organisation,
communication and acceptance of other ideas. There is a saying that “more than two people
require a leader” and the author found herself having to organise groups in order to finish
projects and carry out presentations placing her in a position of a leader. The researcher has
developed confidence from in class presentations and completed projects.
E. Intercultural adaptation
Being able to study in a different country, in a class full of mixed races has provided the author
with this skill. The MBA program created room from interaction between students and this
opened the author up to conversing with individuals from different countries, giving him the
opportunity to be open minded. Peer learning is very important in every society and the author
found herself learning about life from the MBA program beyond the classroom.
Although researcher was working as Branch manager in banking sector prior to pursue this
course and has ample working experience of 8 years or so in financial sector but learning style
and the education system is quite different in Ireland as compare to India. Broadly speaking,
the education system in Ireland is more of application based contrasting to India where it is
more of theoretical based. However, thanks to the support of the faculties, the researcher
doesn’t find any difficulty in adapting new environment.
F. Time management skill
In order to obtain primary research, the author carried out interviews with experts in the field
of concern and this has helped her tremendously to develop preparation skill. The interviewees
are experts in their fields and had busy schedule and the researcher had to find appropriate
timing. To fix an interview with the respondents it was initially a daunting task, however, with
the passage of time, time management skills of the researcher has been greatly enhanced while
conducting these interviews.
82
In conclusion, the researcher cannot forget the efforts of his dissertation Supervisor,
Enda Murphy Sir, who made a difficult modules such as Financial analysis & Financial
markets seem like an easy to understand concept. The experiences he have had over the past
year has helped him, gain fresh perspective towards life , learn about new cultures, the way the
western culture operates, etc. He can confidently say that all the experiences have made him
into a better functioning individual with more maturity and sincerity and a constructive
component to society.
83
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Appendices
Appendix A:
Interview Questions:
banking sector?
frauds in banks?

unreported?
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Appendix B: Interviews Transcripts
• Participant position: Branch Head

Name of the Bank: “A” Bank.
Country: India.
“A” Bank:
1.Does your bank has been impacted by the different kinds of fraud prevailing in banking
sector?
Yes we are heavily impacted by cybercrime. In the fiscal year 2018-19 we had lost around
3000 crores due to ever increasing cases of frauds.
frauds in banks?
Well during my vast banking career I would say that in earlier times fraud were mainly related
to Advance related or KYC related where customer used to provide Fake/Forged documents,
however, now things has been changed in last couple of years and frauds are mainly related to
technology related. Talking about sources of these frauds I would say most of the advance
related & KYC related frauds are originated within the country from the States of Uttar Pradesh
& Bihar. While in case of Technology related frauds spammers are generally originated from
China & Pakistan.

There are many gaps existing in present system to combat these frauds. To name some of them
are:- i). Poor Management ; ii). Inexperienced Personnel ; iii) Inadequate Training and Re-
Training of Staff ; iv). Lack of robust & updated software & technology etc.
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regarding monetary loss due to fraud as in many cases Frauds remained unreported?
We follow the guidelines provided by the regulator to lodge the complaint which you can find
at their website: www. rbi.org.in. We are having dedicated a web based portal known as
Customer Grievance Redressal Cell, aimed at providing the customers with a platform to lodge
their grievances such as frauds & has been provided on the Bank's website, under Customer
Care. Complaints received directly at Head Office are also lodged through this portal for
monitoring, record & follow up. The Principal Nodal Officer, of the rank of General Manager
designated by the Bank, monitors the implementation of customer service and complaint
handling mechanism for the entire Bank. Complaints received from customers are being
redressed and suitable replies are sent to the customers. The partially or wholly rejected
complaints are escalated to the Internal Ombudsman for obtaining an impartial view of the
customers' grievances.
There is exponential increase in technology related frauds now a days. For instance, in the last
financial year, we had faced new kind of fraud which was perpetrated via malware attack on
the main server of our bank. The modus operandi was by sending phishing mail and thus
entered into our database. As soon as malware inserted into the system, POS/ATM proxy
switch was set up parallel to our bank’s central switch. As a consequence of this, fraudsters
were able to clone many ATM cards which were exact replica of customers’ ATM cards &
money was withdrawn from all these cards.
Well, If you would go through Bank’s Annual report 2018-19,you will come to know many
technological innovative steps has been taken by bank such as:-
• Board approved Cyber Security Policy and Cyber Crisis Management Plan have also
been introduced separately apart from IT Security Policy and IT Security Procedure.
• Bank has set up its Cyber Security Operation Centre (CSOC) with twelve major
security solutions to detect, monitor and manage cyber security events to protect its IT
assets.
• The Bank has deployed various security tools such as firewall, Intrusion Detection
System (IDS), Intrusion Prevention System (IPS), e-Mail Security Gateway, Antivirus
Solution etc. to mitigate various security threats.
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• The Bank has implemented Hyper Text Transfer Protocol Secure (HTTPS), Extended
Validation Secure Sockets Layer (EV SSL) for internet banking.
• Second Factor Authentication (One Time Password /Grid Card), Virtual Keyboard and
CAPTCHA are implemented in Internet Banking.
• Quarterly VAPT (Vulnerability Assessment and Penetration Testing) and yearly
Information System Audit are also conducted for CBS & allied infrastructures to plug
in gaps related to security, if any .
The Bank has also identified certain areas as 'Zero Tolerance Areas' & 'Fraud Sensitive Area'.
These will foster and ensure further robustness of the system and control in the branches as
well as to keep the serious lapses and irregularities at minimum level. Inspection and Audit
Policy, RBIA Module, Management Audit Format have been modified / reviewed by the
Operational Risk Management Committee/ Head office Audit Sub Committee/ Audit
Committee of the Board/ Board of Directors of the Bank.
The Bank has also separate Vigilance department which focuses on identifying the areas prone
to frauds and taking various proactive, participative and preventive measures to eradicate the
evil of corruption and frauds and also emphasizes to ensure that various checks and balances
are in place and systems & procedures are observed in day to day functioning of the bank.
Vigilance set up has been examining the existing rules and procedures, in areas prone to fraud,
to eliminate or minimize the scope for corruption or malpractices.
Sorry, this information is confidential.
9.Do you think that due to exponential increase in frauds in Indian banking sector, trust
Yes you are right that due to exponential increase in cyber-frauds trust between bank &
customer is declining. To counter this, our bank has taken many proactive steps such as :-
The Bank’s cyber security framework is built around five fundamental areas including Identify,
Protect, Detect, Respond and Recover.
Bank has also augmented it cyber security capabilities during current year by deploying:
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o Website Anti-Phishing monitoring solution,
o Email Anti-Spamming and Anti-Phishing solution,
o Dark Web deep insight monitoring capabilities and
o Adopting Cloud Security Framework
What I feel there is a deep relation between incidents of frauds, trust of customers and future
of banking. If we are able to contain ever increasing cases of frauds by exploiting technological
advancement on our bank we are definitely sure that we are going to have an edge over our
competitor banks & eventually we will be able to retain the trust of our customer. This is quite
evident from our latest financial results that as we have invested heavily on enhancing our
cyber-security, the deposits of our bank has increased by whopping 16%.
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• Participant Position: Manager(IT)
Name of the bank: “S” Bank.
Country: India.
“S” BANK:
sector?
Yes, our bank was impacted by frauds in the past. In last couple of years there were many
complaints from our customers regarding fake calls in which fraudsters used to address
themselves as branch manager and used to say, ”Hi, I am Mr. X speaking from A Bank. Your
card has been blocked by bank & we will issue new card to you. Kindly give your card number
& PIN so that we can issue new card to you.” As soon as customer revealed his credentials,
within a spur of moment all the money from innocent customers’ accounts are withdrawn.
Around Rs 150 crore has been lost due to this vishing(Fake calls) frauds in last financial year.
Bank is also facing KYC related frauds where Fake ID s’ and forged documents are presented
to bank & loan has been taken on these fake documents.
2.According to your view, what could be the primary sources or causes of increasing
frauds in banks?
Well, if you will talk about amount related to frauds then largest amount of frauds are related
to advance related frauds particularly mortgage loans where forged documents are presented
to bank. However, now a days, although, ticket size of amount involved in technology related
frauds are low but number of incidents are very high. Innocent customers falls prey to phishing
attacks(fraudulent e. mails) which are mostly generated from the countries like China,
Bangladesh, Venezuela, Nigeria etc.

Well if you talk about KYC or Advance related frauds then the biggest gap of increasing frauds
is due to lack of awareness and training of staff. While in case of technology related frauds,
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they generally occur due to non-adherence to standard procedures by the staff & lack of latest
updated softwares & technology. Moreover, lack of coordination among different public sector
and private sector banks on information related to fraud related is another bottleneck in our
banking system.
4.What policies or procedures your bank follows when some customer lodge a complaint
Our bank is abide by the policies and guidelines laid down by our regulator bank, Reserve
Bank of India. Bank has put in place a robust online Complaint Management System (CMS)
where customers can lodge their frauds and other complaints/feedback online through the
website. In addition to this, Bank’s Contact Centres are functioning 24*7*365 in different
geographical areas taking care of customers in Hindi, English and 10 major regional languages.
For educating customers on various products of electronic banking channels, tech-learning
centres were established. Bank has introduced a system of collecting feedback of customers
in its complaint resolution mechanism to improve the Grievance Redressal procedure.
Bank is extending a service through which customers can block his/her debit/credit card &
internet banking by forwarding the transactional SMS or email received from the Bank on
his/her registered email with Bank on designated number / email ID registered with the Bank.
Consequently, the system will immediately block the Debit card/credit card& internet banking
credentials if the customer reports an unauthorized transaction.
As you know that now a days people are very active on social media like Facebook, WhatsApp,
Twitter etc. So fraudsters are exploiting these platforms. For example our bank has recently
experienced fraud: The customer was having friend on face book pretend to be from UK. The
friend sent a message to the customer regarding her visit to India along with copy of ticket.
Next day, customer got a call from Air Port that Ms. X has arrived to India and she is having
Cheque of Rs.4 crores. She will . not be allowed to come out of airport without completing tax/
Money laundering related formalities. She does not have any other money and is required to
pay Rs.2 lacs to clear this. Customer was given three account numbers through email of custom
office. One of the accounts given was of Bank X.
Customer in trust, deposited the money. Afterwards, when tried to contact the person who
called him, he/she was unable to contact. He realized that he was cheated by someone.
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Our bank is always the front-runner in introducing new technological innovation to combat
fraud. Some of the novel steps taken by our bank are :-
§ Our Data Centre is now equipped with nine layers of security.

§ Network Access Control (NAC), has been implemented for protection from Cyber
Attacks in addition to existing services like Anti-Virus, AD among others.
§ IT Service Management (ITSM) processes have been implemented to manage IT
infrastructure.
§ GPS technology enabled Mobile app to provide location based CSP Inspection.
§ Centralized Database for Prepaid Payment Instruments.
The Bank’s Internal Audit function provides an independent view to its Board of Directors and
Senior Management on the quality and efficacy of the internal controls, risk management
systems, governance systems and processes in place on an on-going basis. This is provided to
primarily ensure that the business and support functions are in compliance with both internal
and regulatory guidelines. In line with the RBI’s guidelines on Risk Based Internal Audit
(RBIA), the Bank has adopted a robust internal audit.
Risk Management Structure:
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Source: From Annual report 2018-19 of Bank.
I cannot tell you the amount but can definitely say with conviction that our bank is investing
heavily on research & taking many pro-active steps to enhance our security measures, for
instance, we have partnered with ORACLE for cyber security matter.
Yes I understand due to ever increasing incidents of frauds particularly cyber-frauds we are
losing public trust. However, our bank is very proactive to bring this trust back
again.AI(Artificial Intelligence) based email segregation for Complaint Resolution, which
understands and identifies customer’s queries and directs them to the targeted desk, using
Machine Learning and Natural Language processing, is in progress.
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Well in today’s competitive banking sector customer is the king. So it become utmost important
that customer has confidence om our bank that their hard earned money is in safe hands. To
facilitate it, every bank has to take futuristic measures to counter the ever increasing cases of
frauds. So we are investing heavily on technological upgradation of obsolete systems and
softwares . Also we used to conduct many ongoing campaigns on educating our customers on
how to avoid frauds and cyber-attacks.
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• Participant Position: Senior manager(Treasury & Forex)
Name of the bank: “I” Bank.
Country: India
“I” Bank:
sector?
Yes, our bank is deeply impacted by the cyber fraud these days. As far as my knowledge is
concerned in the last financial year maximum number of cyber related frauds occurred by the
application of Skimmers in the ATM machines. Skimmer is a small electronic device which is
affixed to an ATM or g. Skimming Point-of-Sale terminals and allows criminals to capture
customer's card information including PIN. We have lost around Rs 200 crores in last financial
year due to Skimming attacks.
frauds in banks?
Technology related frauds are increasing day by day. One of the main sources of increasing
frauds in Indian banking industry is the increasing availability of fake mobile apps at google
play store and apple store. Most of the fraudsters are now tech-savvy and they have the
expertise in designing these fake apps which mimics exactly the same as original apps in design
and usage. It is very difficult for the customer to differentiate and they erroneously downloads
the fake apps and start doing banking transactions. Hence, banking credentials of the customers
get share with fraudsters.

There are many gaps exists in present banking industry in effective controls/countermeasures.
One of the biggest hurdles is to prove fraudster guilty in court of law. Practically, in most of
the bank fraud cases, they are detected so late that by that time, fraudsters get enough time to
wipe out trails and it becomes very difficult to establish and prove criminal intent due to loss
of relevant documents & non-availability of witnesses. Also, while pursuing fraudsters, banks
and investigation agencies face many operational issues. Bankers are not experts in legal
paperwork, and formal complaints against fraudsters drafted by them often lack incisiveness.
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This results in very low conviction rate for fraudsters (less than 1 percent of total cases). Even
after conviction in fraud cases, there is no legal recourse to recover the amount lost in the bank
frauds and the country’s legal system is perceived to be very soft on defaulters. Also, lack of
strong whistle-blower protection law inhibits early detection in case of involvement of internal
employees.
Our Bank strictly follows the guidelines according to regulator, Reserve bank of India. The
Bank has a well-defined grievance redressal mechanism with clear turnaround time for
providing resolution to customers. All complaints received by the Bank get recorded in a
Customer Relationship Management (CRM) system and tracked for end-to-end resolution. The
Bank also has an escalation matrix built in the CRM system to ensure that customer
requirements are appropriately addressed within the stipulated timelines. Further, as
recommended by RBI, the Bank has appointed a senior retired banker as the Internal
Ombudsman of the Bank. The Customer Service Committee of the Board, the Standing
Committee on Customer Service (Customer Service Council) and the Branch Level Customer
Service Committees monitor customer service at different levels.
With the deep penetration of technology, technology related frauds are on increase. In the last
financial year as I already mentioned Skimming attacks were the real headache for us. Also,
Cloning of debit/credit cards were also the big problem to handle.
With a 360-degree approach to cyber security, the Bank believes that this is a continuous
journey in line with rapidly evolving digital technologies and developments in the external risk
landscape. The approach covers all aspects of prevention, detection and response. The Bank
also lays emphasis on customer elements like protection from phishing, adaptive
authentication, awareness initiatives and protection and risk configuration ability in the hands
of the customers. In fiscal year 2019, a unique feature was introduced in the Bank’s mobile
application, “iMobile”, wherein a customer can view card-related parameters and modify them
based on one's requirements. These parameters include changing the card limit, temporarily
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blocking the card or selectively blocking the card for ATM or internet transactions. The Bank
also ran an intensive campaign across different channels of the media to create customer
awareness on these features.
The Bank also conducts and participates in cyber security drills to continuously fine tune its
response mechanisms. The Bank also runs multiple awareness and internal simulation exercises
to ensure high levels of employee awareness on information security.
Source: Bank annual report 2018-19.
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RISKS MITIGANTS
Rapid technological developments and the The Bank’s Information Technology

increasing dependence on technology, Strategy Committee ensures that
combined with the continuous digitization in information technology strategy is aligned
with the business strategy. The Committee
banking activities have exposed banks to a
meets periodically to review ongoing IT
host of new risks like obsolescence of IT projects and their schedules, major IT
systems, IT resiliency and business incidents, technology risk indicators and
continuity, technology vendor/third party status of regulatory compliance. The Bank
risk, incorrect/inadequate data backups, has established policies and control
inadequate change management practices, frameworks on change management, logical
ineffective identity and access management access management, IT outsourcing and
Data Centre processes to ensure that the
leading to unauthorized access to IT systems,
risks are identified and appropriate
budget over-runs in IT projects, regulatory mitigating controls are put in place. In
non-compliance and other relevant matters. addition to this, independent assessments of
Misalignment between business and IT IT processes are carried out by the Internal
strategies is also a formidable risk. Audit Group periodically to provide
assurance on the effectiveness and
efficiency of IT systems and processes.
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I cannot disclose the figure.
Customer service is an important pillar of banking and the Bank makes continuous efforts
towards improving customer trust . To keep up with evolving customer expectations, the Bank
is increasing its focus on customer delight and advocacy.
The Bank follows a 4D framework to map the entire customer journey across products,
processes and channels.
Increasing reliance on technology and digitization increases the risks of cyber-attacks including
computer viruses, malicious or destructive code, phishing attacks, denial of service or
information, ransomware, unauthorized data access, attacks on personal emails of employees,
application vulnerability and other security breaches. This could negatively impact the
confidentiality, integrity or availability of data pertaining to the Bank and its customers. The
Information Technology Strategy Committee oversees cyber security related threat landscape
and the Bank’s preparedness to address these from a prevention, detection and response
perspective. The Bank also lays emphasis on customer elements and has invested in the areas
of phishing protection, adaptive authentication, awareness initiatives and has also taken
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industry-leading initiatives in providing customers with an easy and immediate ability to
configure their risks and limits.
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• Participant Position: Deputy General Manger
Name of the bank: “B” Bank
Country: India
“B” BANK:
sector?
Our bank is deeply impacted by the cyber fraud. In 2015, Central Bureau of Investigation(CBI)
filed its charge sheet against two employees of our bank for offences including criminal
conspiracy and frauds in connection with alleged illegal remittances of over Rs 6,000 crore
made to over 350 accounts in Hong Kong and Dubai from one of its branch in India.
Fraud took place broadly at three levels--accounts were opened in fictitious names in
contravention of KYC norms, the manipulations in the accounts to facilitate foreign exchange
transfers and the source of money which was being transferred from multiple accounts to these
accounts. The accounts were allegedly opened either in fictitious names or in the names of
persons who were employed in different companies. Forged and fake identity papers like PAN
Cards, Voters ID cards etc. were allegedly used for opening the accounts.
frauds in banks?
I would say that the main cause of increasing frauds in banks is paradigm shift in the way
banking is done today. The customer is shifting from brick-mortar branches to online banking.
The transformation has taken place without proper knowledge & necessary precautions while
doing online transactions. Although it is more convenient for the customers, but, they are not
as tech-savvy as fraudsters. So, Fraudsters exploit these loopholes. Moreover, technology is
very dynamic and evolving everyday, so banks’ softwares and systems installed today becomes
obsolete tomorrow. Because bank has limited resources and money to keep updating its
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technology and system regularly, their system becomes prone to Viruses, Malwares, Phishing
etc.

Indifference and knowledge gap are two basic factors responsible for the gaps in effective
control. Indifference develops a lack of team-spirit and motivation among employees and leads
to casual attitude towards their responsibilities. They do not evince any interest in knowledge
and skill required and do not update the various instructions periodically circulated by the
corporate office, which ultimately turns out to be breeding ground for frauds.
The bank follow the guidelines issued by regulator bank which you can access to:
www.rbi.org.in.The Bank has an On-line Grievance Redressal Management Portal called
Centralized Grievance Redressal Management System (CGRMS). Customers can lodge
their requests/complaints in the CGRMS through Bank’s website, Internet Banking Service,
Mobile Banking Service and Mobile App. Complaints are also received at Head Office, all the
Circle Offices and over 1,856 SAP-CRM enabled branches. These are entered in CGRMS.
Through this system, the customer gets an immediate automatic acknowledgement and can
keep a track of the complaint also.
New technology related frauds such as Phishing, Malware attacks, Skimming etc. are quite
common in our bank. However, recently our bank has encountered new type of fraud known
as Sim Swap fraud .In this type of fraud the mobile number of a customer is hijacked through
bogus sim replacement at a mobile outlet/agent. The fraudster then uses the mobile line to
access the mobile banking by receiving sensitive details like PIN through PIN reset request.
6.How your bank is implementing new technological innovation to combat frauds?
106
Over the years, the Bank has built a strong foundation for cyber security comprising of a
comprehensive set of information security measures to counter cyber-attacks. The Bank has a
well-defined cyber security governance framework in place that is operated through a
combination of management structure, policy framework and operational controls.
In order to detect and prevent cyber incidents, the Bank has upgraded its Captive Security
Operations Centre to Cyber Security Operations Centre (C-SOC) which operates on a 24x7
basis. During the year, the Bank has further :-
• Implemented multi-layered security architecture to protect IT Assets.
• Periodic audits of applications and infrastructure to identify weaknesses in the existing system
and to take steps to rectify deficiencies.
• Phishing sites, rouge mobile apps and social media sites are monitored for malicious
activities/contents and the same are taken down on detection through anti-phishing and brand
protection services.
• Advanced security solution implemented to detect and prevent Bank’s critical infrastructure
from persistent threats and zero-day attacks.
• Data Leakage Prevention solution to detect and prevent unauthorised usage or misuse of
business sensitive information.
• Technology for detection of anomaly in network traffic and its behaviour to detect network
level attacks.
• Implemented technology to protect the systems from Distributed Denial of Service (DDoS)
and obtained clean pipe to ensure uninterrupted customer service.
The Bank has also taken various initiatives for educating customers through various channels
such as SMS, ATM slips, ATM screens, Digital Displays, Website etc. Employees are
sensitised in the field of cyber security through circulars, mandatory E-Learning courses.
7.What kind of risk management policies your bank has implemented to address the
Basically in Bank there are 3 types of risk: Credit Risk, Market Risk & Operational risk. What
I feel that we can’t avoid risk but we can only minimize it. To mitigate these risk our bank
follows 3 step process: a).Identify ,b).Measure c).Control.
The Bank has implemented a web-based Operational Risk Management system called SAS
Enterprise Governance, Risk and Compliance (EGRC) for systemic and integrated
management of Operational Risk. To mitigate and control operational risk at a transaction
level, Bank has established a Centralized Transaction Monitoring Unit for monitoring of all
domestic transactions from the KYC/ AML/ CFT perspective. The Bank has segregated
customer interface (front office) from the execution of transactions (back office) by
107
centralizing a number of back office functions. The Centralized Trade Finance Back Office
(TFBO) for forex transactions has been set up to minimize operational risk in forex
transactions.
8.How much amount of money your bank is spending on research to combat frauds?
Sorry, I am not in the position to tell you the exact amount as this information is very
confidential. However, I can certainly say that our bank is investing sizeable amount of money
to combat fraud. Moreover, our bank already has tie-up with HP and Infosys, who have
expertise in IT field and combatting frauds.
As you know that future of banking industry lies on how well your bank is well equipped with
latest technology. To bring trust & confidence of our customer we believe in out of box thinking
& are taking many innovative steps such as:-
Setting up of Security Operation Centre (SOC)
To improve cyber security posture of the bank and to achieve an effective cyber security shield
against numerous threats to Bank's IT Asset on a 24x7x365 basis, a full-fledged Cyber Security
Operation Centre (CSOC) has been set up by the Bank at its Data Centre and the same is now
operational with following 12 solutions:
• Data Loss/Leakage Prevention (DLP)

• Cyber Security Operations Centre (C-SOC) with Security Information and Event
Management solution (SIEM)
• Web Application Firewall (WAF)
• Database Activity Monitoring (DAM)
• Proxy and WEB Gateway
• Privilege Identity Management Solution (PIM)
• Anti-Advanced Persistent Threat (Anti-APT)
• Vulnerability Assessment Scanners (VAS)
• Network Access Control (NAC)
• End-point Behavioural Based Protection Solution
• Mobile Device Management(MDM)
• Anti-DDoS
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Well, I am not denying the fact that due to increasing cases of frauds , somewhere we are losing
public trust. I believe that the most important thing in bank is Public trust. If you lose trust of
public, you will lose capital/deposits and if you will lose capital, then your bank is finished.
That will be the horrible situation for any bank. So bringing trust and integrity of public on
banks are the most important thing. We are the custodian of public money. So it is our moral
responsibility to take care of public money with honesty and integrity. To make our bank
future-ready it has implemented state-of-the-art Data Centre tools for Network Management at
its Data Centre and branches/offices. In addition, the Bank has also implemented application
performance management for synthetic monitoring of internet banking and core banking
applications. The Bank has set up two IT centres of excellence to build a future ready
organisation.
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• Participant Position: Manager (IT)
Name of the bank: “H” Bank
Country: India
“H” Bank:
sector?
Yes our bank’s balance sheet is deeply impacted by frauds. Be it Advance related or KYC
related or Technology related. If you would talk about amount wise related frauds then biggest
chunk of frauds are related to advance related followed by KYC related and last one are the
Technology related frauds. However, if we talk about number of fraud incidents then
technology related frauds has the highest number followed by KYC related & least are advance
related frauds. Our bank has lost almost 4500 crores due to these frauds in last financial year.
frauds in banks?
One of the prime reasons according to me would be there is sudden and tremendous increase
in banking business in India. The number of nationalized bank branches increased from 8200
in 1969 to more than 64000 in 2009. The sudden expansive explosion has created a vacuum of
properly trained and experienced persons. New recruits often do not have adequate training or
experience before they are put in responsible positions, which they handle irresponsibly.
Secondly, I would say that the life has become too fast. The banker does not have enough time
to scrutinize documents thoroughly as magnitude of work-load has increased drastically. Lastly
and probably the most important is related to “moral hazard”. The moral values are falling.
“Quick Buck” has become the new goddess of the public. Bank frauds offer convenient access
to the goddess.

There are many gaps in bank. Firstly, I would say that due to existing HR recruitment policy
bank is unable to hire competent professionals and expertise from the market(lateral hiring).
Lack of adequate training in fraud prevention techniques is another issue, which contribute to
110
increasing fraud cases. Moreover, at times, Senior executives themselves cover-up some big
fraud cases to meet their short term targets and goals and create rosy picture for the
shareholders. Also, as per judicial law in India, wilful defaulter is still not considered as a
criminal offence. Hence, Fraudster take undue advantage of these means of evasion and
commit maligned activities without risk of conviction.
Our bank strictly follow the policies and procedures laid down by regulator bank. The Bank
has an On-line Grievance Redressal Management Portal called Centralized Grievance
Redressal Management System (CGRMS). Customers can lodge their requests/complaints
in the CGRMS through Bank’s website, Internet Banking Service, Mobile Banking Service
and Mobile App.
Recently our bank has got many complaints from customers of incidents of newer way of
committing fraud known as Identity Fraud. In this fraud criminals obtaining key pieces of
personal information that they use to pretend to be you. Criminals use these personal details to
obtain financial services products in your name such as credit cards, loans, state benefits and
documents such as driving licenses and passports. Alternatively criminals can use your
personal information to gain access to your existing accounts. Our bank has taken proactive
steps to prevent these kind of identity fraud by allotment of Unique Customer Identification
Code(UCIC) to all the customers so that their identity cannot be theft.
To do this, we bring next-gen technology into play.
Namely, Artificial Intelligence (AI).
AI is fuelled by data, specifically customer data, to generate tailor-made solutions. This is

similar to a salesperson observing a customer’s preferences, and recommending them products
they may like. As our customers interacted and transacted across our digital platforms, we were
111
able to gather insights on their transactional and behavioral data. AI-based technologies could
then harness the massive troves of data, and analyze it to understand their needs, and use that
understanding to create a unique, highly personalized banking experience for everyone.
Today, we’re proud to employ a dedicated team of AI domain experts. Our investments in the
field have enabled us to provide innovative product offerings and convenient experiences to all
our customers. We continue to build on our capabilities using cutting-edge technologies to
strengthen our digital solutions to offer cohesive and contextual experiences.
Innovation:
We aim to develop disciplines around new technologies like Robotic Process Automation
(RPA), Machine Learning (ML), Artificial Intelligence (AI) and Blockchain to further enhance
our current digital portfolio. In the long run, these programmes would help integrate the
knowledge required to underpin the horizontals of, and strengthen our position as an
organisation of the future. Going forward, we will continue our focus on
Bank has an effective framework in place to manage cyber security. The framework rides on 4
pillars viz: - Protect, Detect, Respond & Recover. The Chief Information Security Officer
(CISO) is the person who is responsible overall for ensuring effective information and cyber
security programme in the bank. There is also a committee of the Board which dedicatedly
looks into cyber security issues and preparedness.
In the year under review, the Bank enhanced its cyber security protocol by enhancing data
protection and cyber defense measures. The Bank also widened coverage of Security Incident
and Event Management (SIEM), which provides a comprehensive and centralized view of the
security scenario of IT infrastructure. Deception Technology Solution was deployed to detect,
analyse and defend against advanced attacks often in real-time. In the case of your Bank, it also
covers emails and endpoints, besides the network.
Firewalls were upgraded to Next Generation with deep packet inspection (DPI) ability. DPI
analyses ‘packets’ which are nothing but parcels of digital information transmitted across the
web in a formatted piece of structured data. Protection against malware, ransomware and denial
of service attacks have been strengthened further.
112
This information is confidential.
9.Do you think that due to exponential increase in frauds in Indian banking sector, trust
To bring bank trust of customer we are taking many innovative steps. The Bank has put in
place a whistle blower policy, and a central vigilance team oversees implementation of fraud
prevention measures. Frauds are investigated to identify the root cause and relevant corrective
steps are taken to prevent recurrence. Fraud prevention committees at the senior management
and Board level also deliberate on material fraud events and initiate preventive action. Periodic
reports are submitted to the Board and senior management committees.
In 2017, we launched EVA (Electronic Virtual Assistant) across all our digital channels.
Customers can chat with this virtual assistant 24x7 and easily obtain the information they need.
Today, EVA, through seamless integration with Google Assistant and Alexa, offers our
customers ease of accessibility. For instance, if a customer wants information on our FD
interest rates, all they have to do is say, “Alexa, what is the interest rate on an FD for a year?”
and EVA responds with the necessary information.
Well, whole banking industry depends on two important factors: Trust & Confidence. It is the
very trust and confidence that public deposit their hard earned money to bank. The relationship
between fraud and trust is inversely proportional. The more vulnerable the bank is to frauds,
the lesser trustworthy bank will be. Technology is the future of banking. To make our bank
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future ready & combat frauds regular tests are conducted to assess the vulnerability of the IT
infrastructure and applications and remedy where necessary are routine. As are anti-phishing
services that help in shutting down phishing sites and protecting the customers from fraud.
114
Appendix C
INFORMATION SHEET FOR PARTICIPANTS
Research Topic: A Study on Frauds in Indian Banking Industry: The way forward to
curb fraudulent practices & increase trust for efficient banking system.
You are being asked to take part in a research study on frauds in Indian Banking industry. The
survey aims to study different kinds of frauds, controls/countermeasures presently available &
where gap exist and how technological innovation can be exploited in addressing these gaps. I
am a student of Dublin Business School pursuing MBA in Finance, student ID: 10511277.My
supervisor for the thesis is Mr. Enda Murphy.
WHAT WILL HAPPEN
In this study, you will be asked 10 questions based on your experience in banking field. Your
personal details would be kept confidential and anonymous.
TIME COMMITMENT
The interview would typically take around 15 to 20 minutes .
PARTICIPANTS’ RIGHTS
You may decide to stop being a part of the research study at any time without explanation
required from you. You have the right to ask that any data you have supplied to that point be
withdrawn/destroyed.
You have the right to omit or refuse to answer or respond to any question that is asked of you.
You have the right to have your questions about the procedures answered (unless answering
these questions would interfere with the study’s outcome. A full de-briefing will be given after
the study). If you have any questions as a result of reading this information sheet, you should
ask the researcher before the study begins.
CONFIDENTIALITY/ANONYMITY
The data I collect does not contain any personal information about you except for the
information you provide about your personal banking preferences. The research will NOT
contain your name.
FOR FURTHER INFORMATION
I or Mr. Enda Murphy would be glad to answer your questions about this study at any time.
You may contact my supervisor via mail at: enda.murphy@dbs.ie
115
INFORMED CONSENT FORM
Research Topic: A Study on Frauds in Indian Banking Industry: The way forward to
curb fraudulent practices & increase trust for efficient banking system.
Project Summary:
This research is being conducted with the aims to study different kinds of frauds,
controls/countermeasures presently available & where gap exist and how technological
innovation can be exploited in addressing these gaps for the efficient banking system to
increase public trust and goodwill. By signing below, you are agreeing that: (1) you have read
and understood the Participant Information Sheet, (2) questions about your participation in this
study have been answered satisfactorily, (3) you are aware of the potential risks (if any), and
(4) you are taking part in this research study voluntarily (without coercion).
Participant’s signature : Participant’s Name :
Student Name (Printed) :Abhijeet Singh Student Name signature : Abhijeet Singh
Date:14/05/2020.
Dublin Business School.
116

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A Study on Frauds in Indian Banking Industry: The way forward to curb

fraudulent practices & increase trust for efficient banking system

Word Count(Except Bibliography & Appendices):20,768.

Dissertation submitted in partial fulfilment of the requirements for the degree of

At Dublin Business School

Supervisor: Enda Murphy

Signed: Abhijeet Singh

Student Number : 10511277

Date: 14th May,2020.

I express my extreme gratitude to my supervisor, Enda Murphy Sir, who assisted me

Keywords: Banking Frauds, Controls/countermeasures, Technological advancement,

S.no Topic Page No.

Figure 1: Number of fraud cases reported by RBI. 11

Figure 3.Growing trend of cyber frauds in NEFT/RTGS transactions. 15

Figure 4. Common types of identity theft frauds/complaint percentage in 2013. 16

Figure 8.Money Mule case 26

Figure 9. Identity Fraud 27

Figure 10.How Skimming is done 27

Figure 11.How Sim Swap fraud is executed 28

Figure 12: The Frauds Encountered in Financial Sector (Area wise) 31

Figure 13: Factors Responsible For Bank Frauds 32

Figure 14: Fraud incidents in Retail Banking 33

Figure15: Fraud Detection Mechanism 33

Figure 16: Response to Fraud Incidents 34

Figure 17. Non-financial losses suffered as a result of incidents of fraud 37

Figure 18. Features of Blockchain that help prevent Fraud 39

Figure 19.Blockchain Process 40

Figure 20. Blockchain Decoded 41

Figure 23. The Research Onion 46

Figure 25. Risk Management Structure of Banks 66

Figure 26. Kolb’s learning cycle 78

Figure 27.Peter Honey and Alan Mumford learning styles 80

List of Tables: Page No.

Table 3. Bank Group wise fraud cases 13

Table 5 Bank Group wise Technology related Frauds 15

Table 6. Current Structure for filing Police/CBI complaints in fraudulent cases 63

1 Euro= 81.47 Indian Rupees(INR)(Approx.) as on 12/05/2020.

1.1 Overview of the study

Source: (Bhasin , M. (2016). Combatting Bank Frauds by Integration of Technology:

1.2 Rationale of the topic

What is the issue?

1.3 Problem statement

Frauds in the banking sector: Some statistics

Figure 1: Number of fraud cases reported by RBI.

(*1 Crore= 10 Million)

(*1 Crore= 10 Million)

(*1 Crore= 10 Million)

Different Category of frauds

Technology related frauds

Figure 3.Growing trend of cyber frauds in NEFT/RTGS transactions.

Frauds in banks’ advances portfolio

1.4 Reason for choosing this topic

1.5 Research aim

1.6 Research objective

The research is intended to fulfil the following objectives:-

1.7 Research Questions

3.According to you, what are the gaps existing in effective controls/countermeasures to

6. How your bank is implementing new technological innovation to combat frauds?

2.2. Theme 1: Case Studies of Frauds in Different Banks

A customer service employee performed unauthorized transactions from a customer’s account

Fraud through Social Media:

Modus Operandi of the Cheating:

2.3. Theme 2: Different categories of Frauds