Banking fraud is a threat to the Indian economy. The fact that, in 2004, cybercrime in India was 347, which rose to 481 in 2005, an increase of 38.5%, while I.P.C. category offense in 2005 was 302, including 186 cases of computer fraud and 68 cases of computer counterfeiting. So it is very important that the occurrence of such fraud should be minimized. Even more appalled is the fact that such fraud also occurs in the banking sector.

At present, Global Scenario Banking System acquires new dimensions. Banking is common in India. The banking system has been operating today in competitive markets in areas of resource mobilization, human resource development, customer service and credit management

. The Indian banking system has achieved a number of outstanding results for the loan,. Indeed, Indian banks are now spreading to the most remote areas of our country. The Indian banking service operating in the very convenient and protected environment of the early 1990s was pushed into the whimsical waters of the strong competition.

A reliable banking system must have three basic features to protect the interests of depositors and public confidence. Theses are: (i) Fraudulent Culture, (ii) Timely Testing of Best Practice Codes, and (iii) In-House Immediate Damage Management System. All these conditions are missing or extremely weak in India. Paragraph 5 (b) of the Banking Decree 1949 defines banking activities … "Banking is the activity of lending or investment, lending or investing of funds, receipt of public deposits, demand or otherwise and controllable , planned, ordered or otherwise. "But if your money is fraudulently withdrawn from the bank, the latter have a strict obligation to pay the deposit. The bank should therefore always ensure that depositors' money is not dealt with fraudulently. The time has come when the security aspects of banks need to be prioritized.

Care of our country's banking system is aimed at all segments of our socio-economic structure. The article contains a discussion on the occurrence of bank fraud and the various methods used to avoid such fraud. Bank fraud is a deliberate omission or commission by any person who is involved in bank transactions or accounting entries and which temporarily or otherwise causes unlawful benefits to any person with or without loss of money. The bank. In this article, the Indian Criminal Code, the Criminal Procedure Code, the Indian Contract Law and the Law on Transferable Instruments have been cited for bank fraud.


The banking system occupies an important place in a nation's economy. In a modern society, the banking institution is indispensable. It plays a key role in the economic development of a country and is the core of the money market in the developed country.

The Indian banking sector has taken a long way to assume its present position. He underwent a major structural transformation after the 14 nationalization of major commercial banks in 1969 and 6 on April 15, 1980. The Indian banking system is unique and maybe there is no parallels in the banking history of any country in the world.


The Indian central bank plays an important role in maintaining the exchange of the rupee, given the close interdependence of international trade and national economic growth and prosperity. This aspect is the broader responsibility of the central bank for maintaining economic and financial stability. For this purpose, the bank is entrusted with depositing and managing the country's international reserves; also acts as a government agent for India's membership of international monetary funds. In addition to economic development, the Bank also provides a number of development and promotion functions that have been registered in the past outside the normal scope of central bank activity. An Important Regulatory Factor


Banks are engines that consider the operation of the financial sector as vital to the economy. By the nationalization of banks, they also appeared as a motor of social change in 1969. After Independence, the banks went through three stages. From character-based lending to ideological-based lending, to date, they have been linked to competitive lending in the context of Indian economic liberalization policies and links to the global economy

. Although the bank's operations have become more and more bank fraud, banks have grown and scammers are becoming more sophisticated and brilliant. In order to keep pace with changing times, the banking sector has diversified its business. The philosophy of classical banking was replaced by mass banking. The challenge inherent in social responsibility and economic viability has increased.

Determination of Fraud

Fraud is "any conduct a person intends to face an unfair advantage". In other words, fraud is an act or omission that has the purpose of causing a person to gain unlawful profits and to commit an unlawful loss to the other, whether by concealment of facts or otherwise.

Fraud is Chapter 17 of the Indian Penal Code and the Indian Contract. Thus, the basic elements of fraud are:

1. Ability and affirmation must be;

2nd It should refer to one fact;

3rd You must know that it is false, or without being convinced of its truth; and

4. Another must initiate the claim in question, or have to do or do not have to act.


Losses suffered by banks as a result of fraud are greater than the robbery, dictation, burglary and theft losses. Unauthorized credit facilities are being extended to illegal satisfaction, such as Commitment to goods, credit cards and accounting entries. The usual method is to borrow fake goods, to value goods, to shuffle goods into a bank, to deceive goods, ignoring bank employees, and promising third-party goods. According to commodities linked to the bank, obsolete stocks are sold out of stock, and the case of weight loss is not uncommon.

The analysis of cases essentially mentions the four main elements that are responsible for the fraud of banks.

first Personnel – both the supervisor and the professionals actively intervening, regardless of whether they are external elements or whether they are outsiders.

2nd It is inadequate for the bank's staff to follow the instructions and guidelines.

3rd Stop External Fraud by Banks on Counterfeiting, Manipulation, Sketches, and Other Devices

4. Businesses, top bank managers, civil servants and politicians in power are increasingly clashing with cheating on banks, curbing rules, abolishing regulations, and striking banking standards


a thorough study of bank fraud reveals a number of common basic features. As part of one or more parts of the bank's employees, it may have been neglect or dishonesty. One of them collided with the borrower. An official of the bank may have picked up the borrower's harsh practice for personal gain. It is possible that the staff of the custodians who are in the interests of the banks have not been approached properly. The Bank's rules and procedures, which are set out in this manual and in the circular, may not have been ignored or deliberately ignored.

Bank fraud is a banker's failure. This does not mean that external fraud does not deceive the banks. But if the banker stands up and knows his job, the task of fraudsters will be extremely difficult if it is not possible. Discovery of Fraud

Despite the care and vigilance, there are still frauds, although their number, frequency and intensity can be significantly reduced. The following procedure would be very useful if we consider:

1. All relevant datasheets, documents, etc. The original documents or other papers on which the investigation is based must be kept locked and locked. It is necessary to examine the bank of any person who may know something about time, examine the manner of fraud and record their statements

. The probable order of events must then be reconstructed by the officer in his own mind

4. Classification of Fraud and Measures Requested by Banks

The Indian Central Bank established a high-level committee in 1992 which Mr. A … Ghosh, the then Dy. Governors Reserve Bank of India to inquire about the various aspects of fraud related malpractice on banks. The committee identified / observed the three main causes of fraud:

1. Looseness by observing the system and procedures established by operational and supervisory staff

2. Confidence in trust of clients who are unsatisfied

3. Unwrought customers prefer weakness while respecting well-founded, timely tested safeguards.

Uniformity in declaring cases of fraud is RBI's question of classifying bank fraud as IPC.

Below is a list of the provisions and remedial measures that can be taken. Fraud (Section 415, IPC)

Remedial Actions

Preventive Fraud Prevention Policies for Authentication, Authenticity, Details Checking for Various Devices, etc. Cross-checks may be focused on persons handling banking assets or managing the bank

2. Criminal Use of Property (IPC Section 403)

Restitution Measure

The criminal use of assets presupposes the custody or control of funds or assets that are so subjected to such fraud. Precautionary measures should be taken to this group of fraud at the level of depositing or controlling the bank's funds or assets. Such a measure should be sufficient, extend the persons who actually handle or actually deposit or control the movable property of the fund or the bank

. Criminal Liability Insurance (Section 405, IPC)

Corrective Action

Initial steps should be taken when a person comes to the bank. It should also be taken care of during bank recruitment.

4th Distribution (Section 463, IPC)

Remedial Action

Both prevention and detection of counterfeiting fraud is important for the bank. Counterfeiting of signatures is the most common fraud of banking activity. The bank must pay particular attention to when the asset is presented or the payer; in the event that a bank pays forged equipment, the original customer is liable for the loss.

5th Counterfeiting of Accounts (Sect 477A)

Corrective Action

When filling out the form and invoices, strict rigor is required. Accounts must be verified daily.

6th Theft (Section 378, IPC)

Remedial Measures

Control of stolen control can be prevented if the bank clearly identifies the traveler's body, the back of the check. This will help the paying bank to easily identify the owner of the check. It is not easy to steal from cabinets and safe warehouses because the master key remains with the banker and the locker's unique key is delivered to the buyer with the right acknowledgment

. Criminal Complaint (120 A, IPC)

In Andhra Pradesh State v IBS Prasad Rao and Others, Accused, who were not registered by the cooperative central banks, both Section 420 read section 120A. all four defendants conspired to cheat the bank with fake false drafts and receipt vouchers

. Banknotes and Banknotes Offenses (489 A-489E, IPC)

These sections ensure the protection of currency notes and banknotes against counterfeiting. Crimes are as follows:

(a) Counterfeiting of False Banknotes or Banks

(b) The sale, purchase or use of genuine forged or counterfeit banknotes or banknotes.

(c) possession of counterfeit or fake banknotes or banknotes which are known or counterfeit and which use the same as genuine.

(d) Creating or transferring assets for the falsification or counterfeiting of foreign currencies or banks

(e) Creating or using documents similar to banknotes or banknotes

Most of these provisions are known criminal offenses under Section 2 (c) of the Criminal Code Procedure , 1973


Below is a list of potentially fraudulent sectors of the banking sector. In addition to these areas, they also caused types of fraud that are common in these areas.

Savings Accounts

Here are some examples of Savings Accounts:

(a) You can show and pay checks by counterfeiters of your depositors

(b) The depositor's sample numbers can be modified, especially after the depositors' death [19659002] (c) Clear invoices may be handled by unauthorized persons or collusive of bank staff and (d) unauthorized withdrawal of client accounts by an employee of the savings bank and subsequent destruction of their vouchers.

Current Account Fraud

(a) opening fraud on behalf of limited liability companies by unauthorized persons;

(d) the fraudulent modification and payment of the amount of checks in accordance with

(b) the presentation and payment of counterfeit signatures

(c) the confidentiality of the trusted companies' the following types of receivables may be committed:

(a) False gold ornaments may be pledged

(b) Subordinated goods may be subject to bankruptcy at the bank or their value may be disclosed.

(c) Use the same commodity for the benefit of different banks.

Fraud is a crime of banks, and unscrupulous people have committed loopholes for systems / procedures. The ideal situation is that there is no deception, but taking into account the earthly reality of the nation's environment and the insecurity of human nature, the institution must always like to overcome frauds at the minimum prevalence levels.

Bank Fraud

Indian Penal Code (1860 45)

a) Section 23 "False Profits".

"False profits" can be obtained by unlawful means, B) "Wrong loss"

"Wrongful loss" means the illegal assets that the losing party has legally entitled.

(c) Feel free to win.

False Loss – A man is said to be unlawfully involved if such person unlawfully retains himself and when such person unlawfully acquires it. A person is said to lose unlawfully if he / she is illegally detained from any property and if the person is unlawfully deprived of their property. [D] Section 24: "Dishonestly"

says that this thing is called "dishonest". [e] Section 28 "Falsified"

A person says that "fake" is one thing that resembles another thing intended to practice deception or to know that it is likely that deceit will be practiced.


1. Section 408 – Confidentiality of the Officer or Official Officer

409. § Officials, bankers, traders or agents criminal offenses

3. Section 416 – Fraud with Personality

4. § 419 Penalties for Personal Fraud


1) Section 463 – Fraction

2) Section 464 – Creating a False Document

3) Section 465 –

5) Section 468 – Counterfeiting for Fraud

6) Section 469 – Counterfeiting for Fame

7) 470- Obligated Document

8) Section 471 – Use of a Real Fake Document

9) 477


Issuance of earnings accounts Section 31

It stipulates that only the exception granted by the Bank and the central government may be authorized , accept, accept, produce or issue any bills, bullshit, bills of exchange, or orders to payers for the money they owe for the claim or if any such person requests and accepts, borrows, or pays sums on accounts, transactions or bank accounts if paid by such person.


The owner has the right to terminate the law on the inseparability of lost account 45A. Section

1. The lost invoice or note finder will not receive any address. The title remains with the real owner. He is entitled to recover from the real owner

. If the search engine receives the lost bill or notes in due time, the beneficiary can validate the valid release. However, the real owner of the search engine may claim compensation for money due to the device.

58th §

If a device is acquired by means of unlawful or unlawful consideration, no possessor has obtained the document from such a maker, acceptor or possessor, or from any party to such a possessor, provided that such possessor or lessee, the person you claim course

85. Section:

Verification ordered.

first In this section, bankers are placed in a privileged position. It stipulates that if the payer orders an order on behalf of or on behalf of the payer, and the banker he calls to pay in due time will release the banker. The customer is charged with the amount thus paid, although the beneficiary's approval may prove to be a fake

. The banker has to prove that the claim has been filed at this stage in a timely manner, in good faith and negligence.

87th § Impact of Material Change

Under the terms of this section, any changes made without consent will be void by the party. Conversion is only valid if the party has a common intention.

138th § Insufficient funds on the account etc. Refusal to Check

If any check made by a person in the account on a banker's money paid by him or her, the payment of any amount of money to another person from this account is totally or partially waived for any debt or other obligation, the bank will not reimburse. or because the amount of money credited on a given account is insufficient to respect the check or exceeds the amount payable under an agreement with that bank, it shall be deemed to be [§(1)CorporateOffenses

If the perpetrator of a criminal offense under Article 138 is a company, any person responsible at the time of committing the offense and is responsible for conducting the business of the company and is under the responsibility of the company and the company, the offense shall be considered to be offensive and shall be prosecuted and punished accordingly.


Security includes a sense of security and freedom from danger and anxiety. When a banker takes out collateral, says gold or in the form of an address book, he loses money, security and restlessness because of the insolvency of the borrower. These should be communicated with all the layers of the organization by appropriate means. Before staff leaders analyze current practices. The security procedure must be explicitly defined and all users must agree on the specific environment. Such practices ensure information security and improve availability. Bank security essentially protects against nonviolent attacks against thieves, dacoits and intruders.


Significant part of the security of banks depends on social security measures. Physical security measures can be defined as specific and special protection or defensive measures that suppress, detect, delay, defend, and defame or enforce one or more of these functions against criminal acts, both covered and secret, and the natural events of the exclamations. Defensive or defensive measures include the construction, installation and deployment of structures, equipment and persons.

Here are some guidelines for checking faulty practices:

1. Rotating Cash Work Within Staff

2. A person may not continue on the same site for more than two months

. The daily newspaper should not be written by the treasurer if another person is available

4. In the case of withdrawal based on a payment order, cash withdrawal is not permitted.

5th The account manager must ensure that all members of the staff register their attendance at the attendance guard before starting work

Document Execution

1. The bank's official uses a strict professional approach to document implementation. Ink and pen used for construction must be kept evenly

. Banking documents should not be written to a typewriter for execution. They should always be done manually.

3rd Execution must always be carried out in the presence of the official,

4. Borrowers should be required to sign signatures with the same signature throughout the document

. Unless there is a specific requirement in the document, it does not need to be certified or certified because such a certificate may change the nature of the assets and the documents are subject to voluntary stamp duty

. The paper on which the bank documents are made must prove it as evidence. Unique and only banks should be available.

7th Printing bank documents must have extremely complex artwork and complex graphics.

8th Documents executed between the Banker and Borrowers shall be kept in custody,


1. Article 91 IPC should be amended to include electronic documents

. Regulation No 1872 on Indian Evidence Article 92 of the Act should be amended to include communication on the provision of pensions

3. Section 93 of the Bankers Book Evidence Act of 1891 was amended to provide legal sanctity for banks' electronic accounting records.

4th Paragraph 94 of the 1939 Reserve Bank of India is amended to facilitate electronic money transfers between financial institutions and banks. New paragraph (pp) has been inserted in Article 58 (2).


In the banking and financial sectors, the introduction of electronic technology for transactions, account management, maintenance and all other related functions is now indispensable. More and more, whether you like it or not, all banking transactions will be electronic. The focus is on commercially important centers, accounting for 65% of banking activity. There are a number of fully computerized accounts across the country.

Switching from cash transactions to paper-based transactions accelerates. Magnetic inkjet character recognition checks work in several countries, besides the four metropolitan cities. In India, the development, management and regulation of an electronic payment system is increasingly at the heart of political discussions. The development of efficient, fast and fast payment and settlement systems is essential for the introduction of new tools such as credit cards, interbank services, ATMs, retail electronic money transfer (EFT) and electronic clearing services (ECS). We launch smart cards, loans and financial electronic data exchange (EDI) for easy processing

Financial fraud (investigation, prosecution, restoration and property restoration) Bill, 2001

Go on Financial Fraud (Investigation, Criminal Procedure, restoration and restoration) Bill was introduced in Parliament in 2001 to curb the Bank's Fraud threat. The Act was forbidding, controlling and investigating financial frauds; recover and restore the properties of such fraud;

Under the aforesaid act, the concept of financial fraud was defined as follows:

512. Financial Fraud

Financial Fraud: Financial Fraud Includes any of the following: acts committed or committed against a person by a person or agent in any transaction with a bank or financial institution or with any other public fund;

The proposition is, as a matter of fact, the one who does not believe this is true;

2nd Actually conceal the fact with someone you know or believe;

3rd A promise made with the intention of fulfilling it;

4th Any other act that deceives;

5th Any such act or omission as the law expressly states is fraudulent.

Provided that anyone who obtains, holds or transfers a financial fraud, or transacts or transfers from any fraud or directly or indirectly fraudulent transaction, commits financial fraud. (19659002) 513 (a) – Penalty for financial fraud

Financial fraud: a) punishable by a severe imprisonment of up to seven years and fined

(b) it is ten years, but it can not be less than five years and may amount to double penalties for such fraud. [19659002] Provided that all funds, bank accounts and assets listed in points (a) and (b) have been appropriately attributed to the investigating agency in accordance with the procedure laid down by law, the funds obtained through the use of funds subject to financial fraud.


The Indian banking sector has undergone tremendous growth since it had been nationalization of 14 banks in 1969. A banki fiókok közel nyolcszoros növekedése 1969-ben körülbelül 8000-re nőtt, mint a 289 kereskedelmi bankhoz tartozó 60 000-nél, amelyek közül 66 bank magánszektorban van.

Két egymást követő számítógépes bizottság volt (Rangarajan-bizottság). Míg az első bizottság 1983-84-ben kék nyomtatást készített a bankszektor gépesítésére és számítógépesítésére vonatkozóan, a második, 1989-ben létrehozott bizottság előkészítette a telekommunikáció és a számítógépek integrált használatát a technikai áttörések alkalmazására a bankszektorban.

a bankok és a bankok elterjedésével a csalások folyamatosan nőttek. Lehetséges, hogy természetes következményei lehetnek azon bankok számának növekedésében, akik jelenleg használják a bankokat. Csak 2000-ben elvesztettük az Rs 673 crore-t, akár 3.072 csalási ügyben. Ezek csak jelentett adatok. Bár ez 0,075% a Rs 8,96,696 crores a teljes betétek és 0,15% Rs 4,44,125 crores kölcsönök és előlegek, vannak olyan számú esetek, amelyek nem jelentettek. 2001. június 30-án összesen 295 kereskedelmi bank közel 65.800 bankfiókja volt Indiában, amelyek összesen közel 3.072 bankcsalásról számoltak be. Ez bankonként közel 10,4 csalást jelent és bankonként kb. 0,47 csalást.

A bankcsalásokkal foglalkozó szakértői bizottság (elnök: Dr.NLMitra) 2001 szeptemberében nyújtotta be jelentését az RBI-nak. A bizottság megvizsgálta és javasolta mind a megelőző, mind a gyógyító aspects of bank frauds.

The important recommendations of the Committee include:

o A need for including financial fraud as a criminal offence;

o Amendments to the IPC by including a new chapter on financial fraud;[19659002]o Amendments to the Evidence Act to shift the burden of proof on the accused person;

o Special provision in the Cr. PC for properties involved in the Financial Fraud.

o Confiscating unlawful gains; and preventive measures including the development of Best Code Procedures by banks and financial institutions.

Thus it can be concluded that following measures should necessarily be adopted by the Ministry of Finance in order to reduce cases of Fraud.

o There must be a Special Court to try financial fraud cases of serious nature.

o The law should provide separate structural and recovery procedure. Every bank must have a domestic enquiry officer to enquire about the civil dimension of fraud.

o A fraud involving an amount of ten crore of rupees and above may be considered serious and be tried in the Special Court.

The Twenty-ninth Report of the Law Commission had dealt some categories of crimes one of which is "offences calculated to prevent and obstruct the economic development of the country and endanger its economic health." Offences relating to Banking Fraud will fall under this category. The most important feature of such offences is that ordinarily they do not involve an individual direct victim. They are punishable because they harm the whole society. It is clear that money involved in Bank belongs to public. They deposit there whole life' security in Banks and in case of Dacoity or Robbery in banks the public will be al lost. Thus it is important that sufficient efforts should be taken in this regard.

There exists a new kind of threat in cyber world. Writers are referring it as "Salami Attack" under this a special software is used for transferring the amount from the account of the individual. Hence the culprits of such crimes should be found quickly and should be given strict punishment. Moreover there is requirement of more number of IT professionals who will help in finding a solution against all these security threats.

Source by sbobet

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