Chapter 1.

Introduction

In recent years, instances of financial fraud have regularly been reported in India.

Although banking frauds in India have often been treated as cost of doing business, post

liberalisation the frequency, complexity and cost of banking frauds have increased

manifold resulting in a very serious cause of concern for regulators, such as the Reserve

Bank of India (RBI). RBI, the regulator of banks in India, defines fraud as “A deliberate

act of omission or commission by any person, carried out in the course of banking

transactions or in the books of accounts maintained manually or under computer system

in banks, resulting into wrongful gain to any person for a temporary period or otherwise,

with or without any monetary loss to bank”.

In the last three years, public sector banks (PSBs) in India have lost a total of

Rs. 22,743 crore, on account of various banking frauds. With various measures initiated

by the RBI, numbers of banking fraud cases have declined, but amount of money lost has

increased in these years. Prima facie, an initial investigation in these cases has revealed

involvement of not only midlevel employees, but also of the senior most management as

was reflected in the case of Syndicate Bank and Indian Bank. This raises serious concern

over the effectiveness of corporate governance at the highest echelons of these banks. In

addition, there has been a rising trend of non-performing assets (NPAs), especially for the

PSBs, thereby severely impacting their profitability. Several causes have been attributed

to risky NPAs, including global and domestic slowdown, but there is some evidence of a

relationship between frauds and NPAs as well.

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 The robustness of a country’s banking and financial system helps determine its

production and consumption of goods and services. It is a direct indicator of the well-

being and living standards of its citizens. Therefore, if the banking system is plagued with

high levels of NPAs then it is a cause of worry, because it reflects financial distress of

borrower clients, or inefficiencies in transmission mechanisms. Indian economy suffers to

a great extent from these problems, and this served as the prime motivation for the

authors to carry out this detailed study of frauds in the Indian banking system and

examining frauds from different angles.

1.1 Current Indian Scenario:-

A bank is a business. But unlike some businesses, banks don’t manufacture products

or extract natural resources from the earth. Banks sell financial services such as car loans,

home mortgage loans, business loans, checking accounts, credit card services, certificates

of deposit, and individual retirement accounts. Some people go to banks in search of a

safe place to keep their money. Others are seeking to borrow money to buy a house or a

car, start a business, expand a farm, pay for college, or do other things that require

borrowing money.

India’s state-run lenders and its banking regulators, along with the government and

taxpayers, must be glad that February has ended. The month saw a string of frauds and

scams being exposed across the country, translating to a loss of nearly $2.5 billion to the

system. This included those perpetrated by jewellers Nirav Modi and Mehul Choksi,

Rotomac’s Vikram Kothari, and Simbhaoli Sugars. What may have added to the sector’s

woes is the government’s reaction, which may have sprung from the desperation to be

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seen acting decisively. But first, here’s a brief look at each of the scams that rocked the

sector this February.

1.2. Theoretical Framework

1.2.1 Definition

 Banking

The business of the banking has been defined in Section 5(b) of the Act as follows:

“Accepting for the purpose of lending or investment of deposit of money from public,

repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise.”

 Bank fraud

Bank fraud is the use of potentially illegal means to obtain money, assets, or other

property owned or held by a financial institution, or to obtain money from depositors by

fraudulently posing as a bank or other financial institution. In many instances, bank fraud

is a criminal offence. While the specific elements of particular banking fraud laws vary

depending on jurisdictions, the term bank fraud applies to actions that employ a scheme

or artifice, as opposed to bank robbery or theft. For this reason, bank fraud is sometimes

considered a white-collar crime.

Fraud, under Section 17 of the Indian Contract Act, 1872, includes any of the following

acts committed by a party to a contract, or with his connivance, or by his agents, with

intent to deceive another party thereto or his agent, or to induce him to enter into the

contract:

 The suggestion as a fact, of that which is not true, by one who does not believe it to

be true;

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  The active concealment of a fact by one having knowledge or belief of the fact;

 A promise made without any intention of performing it;

 Any other act fitted to deceive;

 Any such act or omission as the law specially declares to be fraudulent

1.2.2 Types of Fraud

This banking fraud can be classified as:

• Fraud by insiders

• Fraud by others

1.2.2.a) Fraud by insiders

 Forged or fraudulent documents

Forged documents are often used to conceal other thefts; banks tend to count their

money meticulously so every penny must be accounted for. A document claiming that a

sum of money has been borrowed as a loan, withdrawn by an individual depositor or

transferred or invested can therefore be valuable to a thief who wishes to conceal the

minor detail that the bank's money has in fact been stolen and is now gone.

 Demand draft fraud

DD fraud is usually done by one or more dishonest bank employees that is the Bunko

Banker. They remove few DD leaves or DD books from stock and write them like a

regular DD. Since they are insiders, they know the coding, punching of a demand draft.

These Demand drafts will be issued payable at distant town/city without debiting an

account. Then it will be cashed at the payable branch. For the paying branch it is just

another DD. This kind of fraud will be discovered only when the head office does the

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branch wise reconciliation, which normally will take 6 months. By that time the money is

unrecoverable.

 Fraudulent loans

One way to remove money from a bank is to take out a loan, a practice bankers

would be more than willing to encourage if they know that the money will be repaid in

full with interest. A fraudulent loan, however, is one in which the borrower is a business

entity controlled by a dishonest bank officer or an accomplice; the "borrower" then

declares bankruptcy or vanishes and the money is gone. The borrower may even be a

non-existent entity and the loan merely an artifice to conceal a theft of a large sum of

money from the bank.

1.2.2.b)Fraud by others

 Forgery and altered cheques

Thieves have altered cheques to change the name (in order to deposit cheques

intended for payment to someone else) or the amount on the face of a cheque (a few

strokes of a pen can change 100.00 into 100,000.00, although such a large figure may

raise some eyebrows).

Instead of tampering with a real cheque, some fraudsters will attempt to forge a

depositor's signature on a blank cheque or even print their own cheques drawn on

accounts owned by others, non-existent accounts or even alleged accounts owned by non-

existent depositors.

The cheque will then be deposited to another bank and the money withdrawn before the

cheque can be returned as invalid or for nonsufficient funds.

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  Stolen cheques

Some fraudsters obtain access to facilities handling large amounts of cheques, such as a

mailroom or post office or the offices of a tax authority (receiving many cheques) or a

corporate payroll or a social or veterans' benefit office (issuing many cheques). A few

cheques go missing; accounts are then opened under assumed names and the cheques

(often tampered or altered in some way) deposited so that the money can then be

withdrawn by thieves. Stolen blank cheque books are also of value to forgers who then

sign as if they were the depositor.

 Accounting fraud

In order to hide serious financial problems, some businesses have been known to use

fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's

assets or state a profit when the company is operating at a loss. These tampered records

are then used to seek investment in the company’s bond or security issues or to make

fraudulent loan applications in a final attempt to obtain more money to delay the

inevitable collapse of an unprofitable or mismanaged firm.

 Bill discounting fraud

Essentially a confidence trick, a fraudster uses a company at their disposal to gain

confidence with a bank, by appearing as a genuine, profitable customer. To give the

illusion of being a desired customer, the company regularly and repeatedly uses the bank

to get payment from one or more of its customers. These payments are always made, as

the customers in question are part of the fraud, actively paying any and all bills raised by

the bank. After certain time, after the bank is happy with the company, the company

requests that the bank settles its balance with the company before billing the customer.

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Again, business continues as normal for the fraudulent company, its fraudulent

customers, and the unwitting bank. Only when the outstanding balance between the bank

and the company is sufficiently large, the company takes the payment from the bank, and

the company and its customers disappear, leaving no one to pay the bills issued by the

bank.

 Cheque kiting

Cheque Kiting exploits a system in which, when a cheque is deposited to a bank

account, the money is made available immediately even though it is not removed from

the account on which the cheque is drawn until the cheque actually clears. Deposit 1000

in one bank, write a cheque on that amount and deposit it to your account in another

bank; you now have 2000 until the cheque clears. In transit or non-existent cash is briefly

recorded in multiple accounts.

A cheque is cashed and, before the bank receives any money by clearing the cheque, the

money is deposited into some other account or withdrawn by writing more cheques. In

many cases, the original deposited cheque turns out to be a forged cheque. Some

perpetrators have swapped checks between various banks on a daily basis, using each to

cover the shortfall for a previous cheque. What they were actually doing was check

kiting; like a kite in the wind, it flies briefly but eventually has to come back down to the

ground.

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  Credit card fraud

Credit card fraud is widespread as a means of stealing from banks, merchants and

clients. A credit card is made of three plastic sheet of polyvinyl chloride. The central

sheet of the card is known as the core stock. These cards are of a particular size and many

data are embossed over it. But credit cards fraud manifest in a number of ways.

They are:

 Genuine cards are manipulated

 Genuine cards are altered

 Counterfeit cards are created

 Fraudulent telemarketing is done with credit cards.

 Genuine cards are obtained on fraudulent applications in the names/addresses of

other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce and Internet facilities

being available on massive scale the fraudulent fund freaking via credit cards will

increase tremendously. Counterfeit credit cards are known as white plastics.

 Booster cheques

A booster cheque is a fraudulent or bad cheque used to make a payment to a credit

card account in order to "bust out" or raise the amount of available credit on otherwise

legitimate

credit cards. The amount of the cheque is credited to the card account by the bank as soon

as the payment is made, even though the cheque has not yet cleared. Before the bad

cheque is discovered, the perpetrator goes on a spending spree or obtains cash advances

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until the newly “raised" available limit on the card is reached. The original cheque then

bounces, but by then it is already too late.

 Fraudulent loan applications

These take a number of forms varying from individuals using false information to

hide a credit history filled with financial problems and unpaid loans to corporations using

accounting fraud to overstate profits in order to make a risky loan appear to be a sound

investment for the bank. Some corporations have engaged in overexpansion, using

borrowed money to finance costly mergers and acquisitions and overstating assets, sales

or income

to appear solvent even after becoming seriously financially overextended.

 Phishing and Internet fraud

Phishing operates by sending forged email, impersonating an online bank, auction or

payment site; the email directs the user to a forged web site which is designed to look like

the login to the legitimate site but which claims that the user must update personal info.

The information thus stolen is then used in other frauds, such as theft of identity or online

auction fraud.

A number of malicious "Trojan horse" programmes have also been used to snoop on

Internet users while online, capturing keystrokes or confidential data in order to send it to

outside sites.

 Money laundering

The term "money laundering" dates back to the days of Al Capone Money laundering

has since been used to describe any scheme by which the true origin of funds is hidden or

concealed. The operations work in various forms. One variant involved buying securities

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(stocks and bonds) for cash; the securities were then placed for safe deposit in one bank

and a claim on those assets used as collateral for a loan at another bank. The borrower

would then default on the loan. The securities, however, would still be worth their full

amount. The transaction served only to disguise the original source of the funds.

 Forged currency notes

Paper currency is the usual mode of exchange of money at the personal level, though

in business, cheques and drafts are also used considerably. Bank note has been defined in

Section 489A. If forgery of currency notes could be done successfully then it could on

one hand made the forger millionaire and the other hand destroy the economy of the

nation. A currency note is made out of a special paper with a coating of plastic laminated

on both sides of each note to protect the ink and the anti forgery device from damage.

More over these notes have security threads, water marks. But these things are not known

to the majority of the population. Forged currency notes are in full circulation and its very

difficult to catch hold of such forgers as once such notes are circulated its very difficult to

track its origin.

But the latest fraud which is considered as the safest method of crime without making

physical injury is the Computer Frauds in Banks. Computerization of banks had started

since 1994 in India and till 2000/4000 banks were completely and 9000 branches have

been partially computerised. About 1000 branches had the facilities for International bank

Transaction. Reserve Bank Of India has evolved working pattern for Local area Network

and wide area Network by instituting different microwave stations so that money

transactions could be carried out quickly and safely. The main banking tasks which

computers perform are maintaining debit credit records of accounts, operating automated

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teller machines, and carry out electronic fund transfer, print out statements of accounts

create periodic balance sheets etc.

1.2.2. It is difficult to investigate for the following reasons

• Hi-tech crime

The information technology is changing very fast. the normal investigator does

not have the proper background and knowledge .special investigators have to be created

to carry out the investigations. the FBI of USA have a cell, even in latest scenario there

has been cells operating in the Maharashtra police department to counter cybercrimes.

C.B.I also have been asked to create special team for fighting cybercrimes.

• International crime

A computer crime may be committed in one country and the result can be in

another country. there has been lot of jurisdictional problem an though the Interpol does

help but it too has certain limitations. the different treaties and conventions have created

obstructions in relation to tracking of cyber criminals hiding or operation in other

nations".

• No scene crime:

The computer satellite computer link can be placed or located anywhere. The

usual crime scene is the cyber space. The terminal may be anywhere and the criminal

need not indicate the place. the only evidence a criminal leaves behind is the loss to the

crime.

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• Faceless crime:

The major advantage criminal has in instituting a computer crime is that there is

no personal exposure, no written documents, no signatures, no fingerprints or voice

recognition. The criminal is truly and in strict sense faceless.

There are certain spy software’s which is utilized to find out passwords and other vital

entry information to a computer system. The entry is gained through a spam or bulk mail.

The existing enacted laws of India are not at all adequate to counter cybercrimes. The

Indian Penal code, evidence act, and criminal procedure code has no clue about

computers when they were codified. It is highly required to frame and enact laws which

would deal with those subjects which are new to the country specially cyber law;

Intellectual property right etc.

The Reserve Bank of India has come up with different proposals to make the way easier,

they have enacted electronic fund transfer act and regulations, have amended, The

Reserve Bank of India Act, Bankers Book Evidence Act etc., experience of India in

relation to information and technology is limited and is in a very immature state. It is

very much imperative that the state should seek the help of the experienced and

developed nations

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1.2.3 Flow chart of procedure post fraud detection and reporting in

PSB’s

Report post

Report Investigation
FRAUD Detection Vigilance
CVC
Department

Report post

Senior
Investigation
Management
Report
Senior
Management
Decision

FRAUD Handled FRAUD Handled by

Internally External Agency (CBI)

Internal External

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1.3. Outline of the Problem

1.3.1. Objectives

 To study the various types of frauds in the Indian banking.

 To create awareness about the customer encounter while banking.

 To identify the precautionary measures to deal with financial frauds.

1.3.2. Scope

 This study will help to the society to prevent the banking frauds.

 This study will also help to the banks to secure their account holders.

1.3.3. Importance of the study

 Importance to banking industry

As the main research participants the information will help in understanding the causes, risks

and the strategies that can be used to combat fraud. The banks will be able to see the how this

affects their overall profitability and can use this information in regards to any new

regulations that might be required in banking as a result of technology and innovation.

 Importance to Potential Investors

This research will shed light on the possible types of bank frauds and will help them in

understanding and therefore enlighten them on how to avoid falling victim. This will ensure

that they do not face huge losses.

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1.3.4 Limitations

1) The study has certain time limit, money limit and individual limit.

2) The study is limited to the banking system of the India only.

3) The data is limited only up to the secondary data.

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 Chapter 2:- Review of Literature

2.1. (Deloitte survey report on banking frauds-2016) T. M. Bhasin Chairman,

Indian Bank's Association (IBA) Chairman and Managing Director, Indian Bank.

Shown banking sector frauds have been in existence for centuries, with the earliest

known frauds pertaining to insider trading, stock manipulation, accounting irregularity/

inflated assists etc. Over the years, frauds in the sector have become more sophisticated

and have extended to technology based services offered to customers. The Indian banking

sector too is experiencing the pain due to increase in fraud incidents with 93% of our

survey respondents indicating that fraud has grown over the last two years. A majority of

survey respondents indicated that they have experienced more than 50 fraud incidents in

the retail banking segment in the last two years (average fraud loss of around INR 10 lakh

per incident) and an average of 10 fraud incidents in the non-retail segment (average loss

amount close to INR 2 crore per incident). This is a significant jump compared to the

survey findings of the previous edition of the Deloitte India Banking Fraud Survey report

where only 40% of respondents claimed such fraud losses.

2.2. An Investigation of Banking Cyber Frauds with Indian Private and Public

Sector Banks, Dr.Ashvine kumar Research guide, Associate, (proff. Hindu institute

of management in Sonipat.)

Certainly the use of technology in the financial services sector for their development has

been a tremendous encouragement. However, business and payment transactions to be

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carried out due to heavy reliance on electronic and digital equipment, a serious threat to

the safety and reliability of financial operations is imposed. With the growing trend of

online and cyber transactions, banking scandals, the number of banking technology tool

use is increasing more and more people are affected. Online payments, ATM machines,

electronic cards and net banking transaction fraud has become a serious issue. Damage to

people and institutions, electronic money transaction after the tight security measures,

these cyber banking firms is due to fraud every year. Causing huge losses to the bank

itself to its customers on a large scale has been found to be involved in fraudulent

practices. Banks themselves have been found to be involved in fraudulent practices in a

big way causing their customers enormous losses. This study is an effort to review and

analyze the subject in Indian context with a comparative touch between private and

public sector banks in the country

2.3. (Yego, Kiprotich John-2016)

studied the size and area of business that organizations operate in, they are constantly

exposed to bank fraud risk. Bank fraud is the loss resulting from inadequate or failed

internal processes, people and systems, or from external events. Overall, fraud is an

important concern in the Kenyan banking industry, even if the loss figures are not

proportionately on a large scale. The overall loss to the bank was primarily from low-

volume. However, the senior banking personnel seemed to be very aware of fraud and its

potential for significant growth.

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2.4. Frauds in the Indian Banking Industry, (Charan Singh, Deepanshu Pattanayak-

March 2016) RBI Chair Professor Economics & Social Science Indian Institute of

Management Bangalore

studied The Indian banking sector has experienced considerable growth and changes

since liberalisation of economy in 1991. Though the banking industry is generally well

regulated and supervised, the sector suffers from its own set of challenges when it comes

to ethical practices, financial distress and corporate governance. This study endeavours to

cover issues such as banking frauds and mounting credit card debt, with a detailed

analysis using secondary data (literature review and case approach) as well as an

interview-based approach, spanning across all players involved in reporting financial

misconduct. The report touches upon the case of rising NPAs in the past few years across

various scheduled commercial banks, especially public sector banks. The study finally

proposes some recommendations to reduce future occurrence of frauds in Indian banking

sector.

2.5. K C Chakrabarty: Fraud in the banking sector – causes, concerns and cures

Inaugural address, by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank

of India, during the National Conference on Financial Fraud organised by

ASSOCHAM, New Delhi, 26 July 2013.

Dr. Rana Kapoor, President, ASSOCHAM and MD & CEO, Yes Bank; Shri M. J.

Joseph, Additional Secretary and Chief Vigilance Officer, Ministry of Corporate Affairs,

Ms. Preeti Malhotra, Chairperson, ASSOCHAM National Council for Corporate Affairs;

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senior members from the financial services industry; delegates to the conference;

members of the print and electronic media; ladies and gentlemen. It is a pleasure to be

here this morning to deliver the inaugural address at the National Conference on

“Financial Frauds-Risk & Prevention.” 2. We all know that fraud, and more so, the

financial frauds have been in existence for a very long time. Some may be surprised, but,

it is interesting to note that Kautilya, in his famous treatise “Arthashastra” penned down

around 300 BC, painted a very graphic detail of what we, in modern times, term as

“fraud”. Kautilya describes forty ways of embezzlement, some of which are: “what is

realised earlier is entered later on; what is realised later is entered earlier; what ought to

be realised is not realised; what is hard to realise is shown as realised; what is collected is

shown as not collected; what has not been collected is shown as collected; what is

collected in part is entered as collected in full; what is collected in full is entered as

collected in part; what is collected is of one sort, while what is entered is of another sort.

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 Chapter 3. Research Methodology

3.1. Introduction

Research Methodology, describes the various methods that were considered

appropriate in conducting this research. Methodology is description of the process, rules,

methods employed in a study. Research in common parlance refers to a search for

knowledge. One can also define research as a scientific and systematic search for

pertinent information on a specific topic. In fact, research is an art of scientific

investigation.

3.2. Research Method

The study is descriptive in nature. It is the process of systematic research for

particular topic, subject or area of investigation backed by the collection, compilation and

interpretation of the relevant details and data.

3.2.1 Descriptive Research: Descriptive research is also called statistical research.

Descriptive research includes surveys and facts-finding enquiries of different kinds. The

major purpose of descriptive research is description of the state of affairs as it exists at

present. In social science and business research we quite often use the term Ex post facto

research for descriptive research studies. The main characteristic of this method is that

the researcher has no control over the variables; he can only report what has happened or

what is happening

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3.4 Sampling Design:-

3.4.1 Population:

The population consisted of people living in Pune city

3.4.2 Sampling frame:

Selected areas in Pune city were considered as sampling frame.

3.4.3 Sampling technique:

Simple random sampling technique was used to select the respondents from the sampling

frame.

3.4.4 Sampling unit:

Each respondents was considered as sampling unit.

3.4.5 Sample size:

207 was the sample size of the research.

3.5. Data Collection:

3.5 Types of Data:-

1. Primary Data:-

In this method the various information was gather for the very first time or we can say

that it is a way of getting first-hand information. Primary data was gather by

questionnaire. This primary data collection was major part of field survey.

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 2. Secondary Data:-

Secondary data was collected from books, business journal, websites & different research

papers to gather the information.

3.6 Tools for Data Collection:-

Primary will be collected through the structured questionnaire and the Secondary data

will be collected from various website & research papers. The data collected will further

be analysed by using various statistical tools.

22 | P a g e
 Chapter 4:- Data Analysis & Interpretation

Table 5.1- What is your age group?

Sr. No. Particular No. of Respondent Percentage

1 21 to 25 52 25.12

2 26 to 30 41 19.80

3 31 to 35 67 32.36

4 Above 35 47 22.72

Total 207 100

Count of Age (in years) (%)

40 32.36
30 25.12 22.72
19.8
20
10
0
21 to 25 26 to 30 31 to 35 Above 35
Ages in Years

Graph No. 5.1:- Count of age in percentage.

Interpretation:-

From the chart it is clear that most of the respondents were between the age of 31 to 35.

This was because most of the people in this age group have good source of earnings &

also have sound knowledge about bank & various frauds.

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 Table 5.2- Do you have Bank Account?

Sr. No Particular No. Of Respondent Percentage

1. Yes 207 100

2. No 00 00

Total 207 100

Count of Bank account holders (%)

Yes
No

100%

Graph No 5.2 :- Count of bank Account holder in percentage.

Interpretation:-

We can see from the graph that all the respondent had bank account in the banks.

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 Table No. 5.3 What Is your Occupation?

Sr. No. Particular No. of Respondent Percentage

1. Business 49 23.67

2. Service/ Job 73 35.27

3. Housewife 03 01.45

4. Professionals 45 21.74

5. Student 37 17.87

6. Other 00 00

Total 207 100

Respondent Occupation (%)

0%

Business
18%
24% Service/ Job
Housewife
22% Professionals
Student
35%
Other
1%

Graph No 5.3:- Respondent Occupation in percentage.

Interpretation:-

From the graph researcher interpreted that 35.27% are job holder, 23.67% are have an

business, 21.74% are professionals, 17.87% are students while housewife are 1%.

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 Table 5.4- What is your monthly household Income?

Sr. No. Particular No. of Respondent Percentage

1. Less than 10000 13 06.28

2. 10000 to 20000 54 26.09

3. 20000 to 30000 67 32.37

4. 30000 to 100000 69 33.33

5. More than 100000 04 01.93

Total 207 100

Respondent Monthly Income (%)

35 32.37 33.33

30 26.09
25
20
15
Series1
10 6.28
5 1.93
0
Less than 10000 10000 to 20000 20000 to 30000 30000 to 100000 More than
100000

Graph No 5.3:- Respondent monthly income in percentage.

Interpretation:-

According to the opinion of the respondent majority of respondent i.e 33.33% were

earning between 30000- 100000 monthly. It was also observed that 32.37% of

respondents were earning between 20000-30000.

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 Table 5.5 How long have you been Associate with Bank?

Sr. No. Particular No. of Respondent Percentage

1. New Account holder 02 00.97

2. 1- 6 Months 13 06.28

3. Less than 1 year 59 28.50

4. More than 5 years 133 64.25

Total 207 100

Customer relationship with Bank (%)

0.97 6.28

New Account holder

28.5 1- 6 Months
Less than 1 year
64.25
More than 5 years

Graph No. 5.5:- Customer relation with bank in percentage.

Interpretation:-

As per the responses obtain from the respondents it can be said that 64.25% bank holders/

respondents were associated with the single bank from more than 5 years it could because

they were working from long period of time in the company’s pay the salary in bank

accounts only. While 28.5% of the respondent were associated with the similar bank for

less than one year.

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 Table No. 5.6 Which of the following type of account do you have?

Sr. No Particular No. of Respondent

1. Saving Account 127

2. Current Account 93

3. Joint Account 45

4. Recurring Account 21

5. Other 3

Respondents Accounts
140
120 127
100
93
80
60
45 Series1
40
20 21
0 3
Saving Account Current Account Joint Account Recurring Other
Account

Graph No.5.6:- Respondent accounts

Interpretation:-

As observed from the graph majority of the respondents were having savings bank

account it could be because the respondents were job holders and they were getting their

salary in the accounts. Second highest no of respondents were having current account

which can be used for their business purposes.

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 Table No. 5.7 Which of the following services you avail from the bank?

Sr. No. Particular No. of Respondent

1. Credit 57

2. Banking 137

3. Loan 108

4. Business 56

5. Mutual Fund 23

Respondent prefernce availing bank's services

150
137

108
100
Series1
50 57 56 Series2

23
0
Credit Banking Loan Business Mutual Fund

Graph No.5.7:- Respondent preference availing bank’s services.

Interpretation:-

The researcher found that most of the respondents avail banking & loan services from the

banks. Out of 381, 137 respondents said that they used to go to banking mainly for

transactions like deposits & withdrawal while 108 respondent were availing facility of

loan while 56 respondents avails facilities for business transactions.

29 | P a g e
 Table No. 5.8 Have you faced any banking fraud?

Sr. No. Particular No. of Respondent Percentage

1. Yes 173 83.57

2. No 34 16.43

Total 207 100

Respondent experience about Banking Fraud (%)

16.43

Yes
No
83.57

Graph No. 5.8:- Respondent experience about banking fraud in percentage.

Interpretation:-

From the above graph it is clear that 83% respondent had faced the banking fraud. It

could be because of lack of knowledge and irresponsibility of people. While 16.43%

respondents never faced any type of frauds.

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 Table No. 5.9- If yes, Then which Banking Sector?

Sr. No. Particular No. of Respondent

1. Administration 19

2. Co- Operative 129

3. Private 63

4. Retail 91

5. Others 02

Responses about frauds in corresponding

sector
140 129
120
100 91
80 63
60 Series1
40
19
20 2
0
Administration Co- Operative Private Retail Others

Graph No.5.9:- Responses about frauds in corresponding sector.

Interpretation:-

As per the responses recorded from the respondents most of the banking fraud take place

in the co- operative banking sector their software & security systems would not be

effective to control or secure the data of banks. Another area for frauds was retail sector.

31 | P a g e
 Table No. 5.10- Which type of fraud have you faced?
Sr. No. Particular No. of Respondent
1. Forged or fraudulent Documents 11
2. Demand Draft fraud 09
3. Forgery and altered cheques 04
4. Stolen cheques 03
5. Accounting Fraud 24
6. Bill discounting fraud 01
7. Cheque kiting 26
8. Credit Card fraud 69
9. Debit Card fraud 111
10. Fraudulent loan Application 01
11. Phishing and Internet fraud/ Net banking 124
12. Money laundering 04
13. Forged currency notes 00

Types of Frauds faced by Respondent

111 124
140
120
100 69
80
60 24 26
40 11 9 4 3 1 1 4 0
20
0 Series1

Graph No.5.10:- Frauds by respondent

Interpretation:-

Researcher observed from the chart that most of the frauds are of two types debit card &

net banking fraud it could be because it easier to get that details of card or online banking

system.

32 | P a g e
 Table No. 5.11- Do you get proper assistance after recognition of fraud?

Sr. No. Particular No of Respondent Percentage

1. Yes 147 84.97

2. No 26 15.03

Total 173 100

Responses for Assistance (%)

15.03

Yes
No

84.97

Graph No. 5.10:- Responses for assistance in percentage.

Interpretation:-

From the above graph it can be assumed that the 84.97% respondents responded

positively hence can be concluded as bank gives proper assistance to the fraud victims

when the account holder recognises that he met with the fraud.

33 | P a g e
 Table No. 5.12- How many times you faced fraud?

Sr. No. Particular No. of Respondent Percentage

1. Once 21 12.14

2. Twice 69 39.88

3. More than Three times 83 47.98

Total 173 100

Frequency for facing frauds (%)

12.14
47.98
Once
39.88 Twice
More than Three times

Graph No.5.11:- Frequency for facing frauds in percentage.

Interpretation:-

It is evident from above graph; almost 48% of the respondents had faced 3 times fraud

from the banks it could be because of bank or customer also. while 40% respondents

faced frauds twice while 12% faced frauds once in their life time.

34 | P a g e
 Table No. 5.13- If you faced the fraud then will you switched the bank?

Sr. No. Particular No. of Respondent Percentage

1. Yes 43 24.86

2. No 69 39.88

3. Will give another 61 35.26

chance

Total 173 100

Responses for switching bank accounts (%)

24.86
35.26 Yes
No
Will give another chance
39.88

Graph No.5.13:- Responses for switching bank accounts in percentage.

Interpretation:-

It is evident from the above graph it was found that 40% of respondents won’t change the

bank as if they faced the fraud it could be because they have full faith on their bank &

also it could possible that they would have given proper attention & information about

how to avoid these frauds.

35 | P a g e
 Table No. 5.14- How is your fraud incident is typically detected?

Sr. No. Particular No. of Respondent Percentage

1. During account audit 34 19.65

2. At the point of transactions 111 64.16

3. Through third party notifications 23 13.29

4. By accident 05 2.89

Total 173 100

Detection of Fraud (%)

70
64.16
60
50
40
30
20 19.65
10 13.29

0 2.89
During account audit At the point of Through third party By accident
transactions notifications

Graph No.5.14:- Detection of fraud in percentage.

Interpretation:-

From the above graph it was found that 64% respondents found there fraud at the point of

transactions. Also 19% respondents found there fraud during account audit.

36 | P a g e
 Table No. 5.15- What do you think is the biggest challenge to fraud Preventions?

Sr. No. Particular No. of Respondent Percentage

1. Lack of customer awareness 89 51.45

2. Lack of audit awareness 53 30.64

3. Organisational selos 02 01.15

4. Insufficient resources 29 16.76

Total 173 100

Respondent biggest challenge about fraud

preventions (%)
60
50
40
30
51.45
20 Series1
30.64
10 16.76
0 1.15
Lack of customer Lack of audit Organisational selos Insufficient resources
awareness awareness

Graph No.5.15:- Respondent biggest challenge about fraud prevention in

percentage.

Interpretation:-

Researcher found that there were two biggest challenges to fraud prevention they were

lack of customer awareness & lack audit awareness. So Banks should provide proper

information to the customers & to the staff about the frauds & types of frauds and lack of

audit awareness.

37 | P a g e
 Table No. 5.16- What action you will take if you faced the fraud?

Sr. No. Particular No. of Respondent Percentage

1. Police compliant 67 38.73

2. Inform to bank 89 51.45

3. Do nothing 17 9.83

4. other 00 00

Total 173 100

Respondent take action against facing fraud (%)

60

50 51.45

40 38.73
30

20

10 9.83

0 0
Police compliant Inform to bank Do nothing other

Graph No.5.16:- Respondent take action against facing fraud in percentage.

Interpretation:-

From the above graph it was found that most of the respondents had clicked the option of

inform to bank & police complaint whenever they will faced the bank fraud. This will

help the bank & the police to take proper action regarding the issue & also will help the

customer to retain the loss in different circumstances.

38 | P a g e
 Table No. 5.17- What precaution you followed after facing fraud?

Sr. No. Particular No. of Respondent Percentage

1. 2 step verification 33 19.08

2. Strong Password 89 51.45

3. Secured browsing 51 29.48

Total 173 100

Respondent taking precaution after facing

fraud (%)
60

50

40

30
51.45 Series1
20
29.48
10 19.08

0
2 step verification Strong Password Secured browsing

Graph No.5.17:- Respondent taking precaution after facing fraud in percentage.

Interpretation:-

Researcher interpreted .that responded who have faced the fraud will put some strong

password to prevent the information which is required for net banking & also can have a

secured browsing also as part of precaution against the frauds.

39 | P a g e
 Table No. 5.18- What security features you are expecting from bank?

Sr. No. Particular No. of Respondent Percentage

1. Software Improvement 67 38.73

2. Experienced employed 43 24.86

3. Training Program 63 36.42

Total 173 100

Respondent expecting security features from

bank(%)

36.42 38.73 Software Improvement

Experienced employed
Training Program

24.86

Graph No.5.18:- Respondent expecting security features from bank in percentage.

Interpretation:-

As per the responses 39% respondent said that there should be software improvement

security system of banks & also 37% people said that there should also be training

program so that the people will know about the different types of fraud & how they can

protect themselves from frauds.

40 | P a g e
 Table No. 5.19- How secure your online bank Portal is?

Sr. No. Particular No. of Respondent Percentage

1. Strongly secured 03 01.73

2. Secured 29 16.76

3. Not Sure 46 26.59

4. Insecure 95 51.91

Total 173 100

Respondent about online bank Portal (%)

60

50 51.91

40

30
26.59
20
16.76
10

0 1.73
Strongly secured Secured Not Sure Insecure

Graph No. 5.19:- Respondent about online bank portal in percentage.

Interpretation:-

From the above graph it could be seen that almost 52% respondents thought that online

banking portal is not secure enough for doing the transactions. So the bank should

arrange training sessions to their customers so that they can have faith in their banking

systems to used easy & effective methods for transactions.

41 | P a g e
 Table No. 5.20- Does your bank conduct fraud awareness campaign?

Sr. No. Particular No. of Respondent Percentage

1. Yes 127 73.41

2. No 46 46.59

Total 173 100

bank conduct fraud awareness campaign(%)

46.59
Yes
No
73.41

Table No.5.20:- Bank conduct fraud awareness campaign in percentage.

Interpretation:-

74% respondent said that their bank conducted fraud awareness campaign to help their

customers not to get affected from different types of frauds. These campaigns help the

customers to understand what are the different types frauds & hoe they can help

themselves and their friends & relatives not to get involve in those frauds & scams.

42 | P a g e
 Table No. 5.21- If yes, have you attended fraud awareness campaign?

Sr. No. Particular No. of Respondent Percentage

1. Yes 89 70.08

2. No 38 35.51

127 100

Respondent attend fraud prevention

Campaign (%)

35.51
Yes
No
70.08

Graph No.5.21:- Attend fraud awareness campaign in percentage.

Interpretation:-

The researcher found that 70% of the respondents had attended fraud awareness

campaign conducted by their banks to understand different types of fraud taking place

while remaining 30% did not attended the awareness campaign.

43 | P a g e
 Table No. 5.22- Do you think a bank is also responsible for fraud?

Sr. No. Particular No. of Respondent Percentage

1. Strongly Agree 36 20.81

2. Agree 27 15.61

3. Neither Agree/ Nor disagree 61 35.60

4. Disagree 34 19.65

5. Strongly disagree 15 08.67

Total 173 100

Respondent think bank is also responsible for

fraud (%)

40
30
20 35.6
10 20.81 15.61 19.65 Series1
8.67
0
Strongly Agree Neither Disagree Strongly
Agree Agree/ Nor disagree
disagree

Graph No. 5.22:- Respondent think bank also responsible for fraud in percentage.

Interpretation:-

From the graph the researcher found that neither the bank nor their customer was fully

responsible for the frauds. it could because both the banks & their customers have faith in

each other, Because one cannot blamed other for any kind fraud.

44 | P a g e
 Chapter 5:- Findings, Suggestions & Conclusion

Findings

 Respondents avail banking & loan services from the banks. Out of 381, 137

respondents said that they used to go to banking mainly for transactions like

deposits & withdrawal while 108 respondent were availing facility of loan while

56 respondents avails facilities for business transactions.

 83% respondent had faced the banking fraud. It could be because of lack of

knowledge and irresponsibility of people. While 16.43% respondents never faced

any type of frauds.

 Most of the banking fraud take place in the co- operative banking sector their

software & security systems would not be effective to control or secure the data of

banks. Another area for frauds was retail sector.

 Most of the frauds are of two types debit card & net banking fraud it could be

because it easier to get that details of card or online banking system.

 84.97% respondents responded positively hence can be concluded as bank gives

proper assistance to the fraud victims when the account holder recognises that he

met with the fraud.

 64% respondents found there fraud at the point of transactions. Also 19%

respondents found there fraud during account audit.

 Two biggest challenges to fraud prevention they were lack of customer awareness

& lack audit awareness. So Banks should provide proper information to the

45 | P a g e
 customers & to the staff about the frauds & types of frauds and lack of audit

awareness.

 Most of the respondents had clicked the option of inform to bank & police

complaint whenever they will faced the bank fraud. This will help the bank & the

police to take proper action regarding the issue & also will help the customer to

retain the loss in different circumstances.

 Responded who have faced the fraud will put some strong password to prevent

the information which is required for net banking & also can have a secured

browsing also as part of precaution against the frauds.

 As per the responses 39% respondent said that there should be software

improvement security system of banks & also 37% people said that there should

also be training program so that the people will know about the different types of

fraud & how they can protect themselves from frauds.

 74% respondent said that their bank conducted fraud awareness campaign to help

their customers not to get affected from different types of frauds. These

campaigns help the customers to understand what are the different types frauds &

hoe they can help themselves and their friends & relatives not to get involve in

those frauds & scams.

 Neither the bank nor their customer was fully responsible for the frauds. it could

because both the banks & their customers have faith in each other, Because one

cannot blamed other for any kind fraud.

46 | P a g e
 SUGGESTIONS:

 All the bank account holders should get proper knowledge about the frauds taking

place in the banking sector.

 Banks should provide proper required information to the customers time to time.

 Sharing of OTP and Card numbers should be avoided.

Conclusion

From the above research the researcher concluded that;

Most of the respondents avail banking & loan services from the banks. Most of the

respondents faced the frauds it as due to their lack of knowledge and their irresponsible

ways of handling bank account details. The bank account holders detect the frauds during

the point of transaction because they could have got the notification for the transaction by

the SMS alert of banks. There are various challenges faced by the bank account holders

and the banks some of them were lack of customer awareness & lack audit awareness. To

increase the awareness of the customers and the staff banks were taking efforts by

providing required training to the staff and information by SMS and Calls to the

customers.

47 | P a g e
 Bibliography

 JOURNALS

1. Deloitte survey report on banking frauds-2016), T. M. Bhasin Chairman, Indian

Bank's Association (IBA) Chairman and Managing Director, Indian Bank.

2. An Investigation of Banking Cyber Frauds with Indian Private and Public Sector

Banks, Dr.Ashvine kumar Research guide, Associate, (proff. Hindu institute of

management in Sonipat.)

3. (Yego, Kiprotich John-2016)

4. Frauds in the Indian Banking Industry (Charan Singh, Deepanshu Pattanayak-

March 2016) RBI Chair Professor Economics & Social Science Indian Institute of

Management Bangalore

5. K C Chakrabarty: Fraud in the banking sector – causes, concerns and cures

Inaugural, address by Dr K C Chakrabarty, Deputy Governor of the Reserve Bank

of India, during the National Conference on Financial Fraud organised by

ASSOCHAM.

 WEBSITES
1) www.economictimes.com

2) www.businesstandard.com

3) www.wikipedia.com

4) www.rbi.gov.in

48 | P a g e
 Questionnaire
Name:- _______________________________________

Contact No:-___________________________________

Email- Id:- _____________________________________

1. What is your age group?

1. 21 to 25
2. 26 to 30
3. 31 to 35
4. above 35

2. Do you have a Bank Account ?

1. Yes
2. No
3. What is your Occupation ?

1. Business
2. Service/ job
3. Housewife
4. Professionals
5. Student
6. Other
4. What is your monthly household income?

1. Less than 10000

2. 10000 to 20000
3. 20000 to 30000
4. 50000 to 100000
5. More than 100000
5. How long have you been associated with bank?

1. New Account holder

2. 1-6 months
3. Less than 1 year
4. More than 5 Years

49 | P a g e
6. Which of the following type of account do you have?

1. Saving Account
2. Current Account
3. Joint Account
4. Recurring Account
5. Other
7. Which of the following services you avail from the bank?

1. Credit
2. Banking
3. Loan
4. Business
5. Mutual fund
8. Have you faced any banking fraud?

1. Yes
2. No
9. If Yes then in which Banking Sector?

1. Administration
2. Co- operative
3. Private
4. Retail
5. Others
10. Which type of fraud have you faced?

1. Forged or fraudulent documents

2. Demand draft fraud
3. Forgery and altered cheques
4. Stolen cheques
5. Accounting fraud
6. Bill discounting fraud
7. Cheque kiting
8. Credit card fraud
9. Debit Card Fraud
10. Fraudulent loan applications
11. Phishing and Internet fraud/ Net banking
12. Money laundering
13. Forged currency notes

50 | P a g e
11. Do you get proper assistance after recognition of frauds?

1. Yes

2. No

12. How many times you faced fraud?

1. Once
2. Twice
3. More than three times
4. Never
13. If you faced the fraud then will you switched the bank?

1. Yes
2. No
3. Will give another chance
14. How is your fraud incident typically detected?

1. During account audit

2. At the point of transaction
3. Through third party Notification
4. By accident
15. What do you think is the biggest challenge to Fraud Prevention?

1. Lack of Customer awareness

2. Lack of staff awareness
3. Organizational selos
4. Insufficient resources
16. What action you will take if you faced the fraud?

1. Police Compliant
2. Inform to bank
3. Do nothing
4. Other
17. What precaution you followed after facing fraud?

1. 2 Step verification
2. Strong Password
3. Secured browsing

51 | P a g e
18. What Security features you are expecting from bank?

1. Software Improvement
2. Experienced employed
3. Tanning Program
19. How secure your online bank Portal is?

1. Strongly secured
2. Secured
3. Not sure
4. Insecure
20. Does your bank conduct Fraud Awareness Campaign?

1. Yes
2. No
21. If Yes, have you attended fraud awareness campaign?

1. Yes
2. No
22. Do you think a bank is also responsible for Fraud?

1. Strongly agree
2. Agree
3. Neither Agree/ Nor disagree
4. Disagree
5. Strongly disagree

52 | P a g e