A

SYNOPSIS

ON

A STUDY OF INDIAN BANKING SYSTEM

FRAUDS AND PREVENTION

PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

Submitted

By

T.PRASHANTHREDDY
H.T.NO: 104320672004

Department of Business Management

OSMANIA UNIVERSITY
POST GRADUATE COLLEGE
SIDDIPET
2020-2022
 OSMANIA UNIVERSITY
POST GRADUATE COLLEGE
SIDDIPET
Department of Management

SYNOPSIS

Title of the Project : A STUDY OF INDIAN BANKING

SYSTEM FRAUDS &PREVENTIONS

Student Name : T.PRASHANTHREDDY

Hall Ticket Number 104320672004

Signature of the Student :

INTRODUCTION

It is universally accepted that for the smooth functioning of a money market and
economic growth of a country, an efficient and good banking system is a must. Banking industry in
India has traversed a long-way to assume its present stature in the 21st century. According to Singh
(2005), “The Indian banking industry is unique and has no parallels in the banking history of any
country in the world. After independence, the banking sector has passed through three stages:
character-based lending to ideology-based lending to competitiveness-based lending.” Similarly,
Kumar and Sriganga (2014) stated, “Banking sector of India accommodates 1175,149 employees,
with total of 109,811 branches in India (and 171 branches abroad), and manages an aggregate deposit
of Rs. 67,504.54 billion and bank credit of Rs. 52,604.59 billion.” Indeed, PSBs have a 75% market
share, but the number of funds by private banks is 5 times of PSBs. The phenomenal spread of
branches, growth and diversification in business, large-scale computerization and networking, have
collectively increased manifold the operational risks faced by the banks. Unfortunately, it is also true
banking industry has to face many types of frauds and scams. The Reserve Bank of India (RBI) is the
central policy making and national-level regulatory body by keeping an eye over the entire banking
industry. Regulations and laws governing the financial services sector in India are continuously
evolving.
Some of the important regulatory drivers for the financial sector in India are as follows:
(a) Reserve Bank of India Act, 1934;
(b) Securities and Exchange Board of India Act, 1992;
(c) Companies Act, 2013;
(d) Prevention of Money Laundering Act, 2002;
(e) The Black Money (Undisclosed Foreign Income and Assets)
(f) Imposition of Tax Act, 2015.
The PwC’s Survey identified that suspicious transaction reporting, effective fraud risk management
measures, whistle blowing processes and tip-offs helped financial services organizations to detect most
frauds.

FINANCIAL REGULATORS IN INDIA

There are mainly three financial regulators in India:

Reserve Bank of India (RBI) - Banking Sector

Insurance Regulatory and Development Authority (IRDA) - Insurance Companies
Securities Exchange Board of India (SEBI) - Capital Markets /Mutual Funds
MEANING OF BANKING AND FRAUDS

Banks as institutions which channel people's savings into productive loans and investments.
Thus banking mainly refers to deposits and loans. A broader definition of banking is any financial
institution that receives, collects, transfers, pays, exchanges, lends, invests, or safeguards money for its
customers. Investment banks, financing companies, and money lenders are just some of the institutions
that have engaged in banking.
Fraud is a worldwide phenomenon that affects all continents and all sectors of the economy.
As per RBI, fraud can be “loosely” described as “any behavior by which one person intends to gain a
dishonest advantage over another.” Fraud encompasses a wide-range of illicit practices and illegal acts
involving intentional deception or misrepresentation. The Institute of Internal Auditors’ “International
Professional Practices Framework (IPPF)” (2009) defines fraud as: “Any illegal act characterized by
deceit, concealment, or violation of trust. These acts are not dependent upon the threat of violence or
physical force. Frauds are perpetrated by parties and organizations to obtain money, property, or
services; to avoid payment or loss of services; or to secure personal or business advantage.” “Fraud
impacts organizations in several areas including financial, operational, and psychological. While the
monetary loss owing to fraud is significant, the full impact of fraud on an organization can be
staggering. In fact, the losses to reputation, goodwill, and customer relations can be devastating.” As
fraud can be perpetrated by any employee within an organization or by those from the outside,
therefore, it is important to have an effective fraud management program in place to safeguard your
organization’s assets and reputation.
Banks can secure and preserve the safety, integrity and authenticity of the transactions by
employing multipoint scrutiny: cryptographic check hurdles. In addition, banks should rotate
the services of the persons working on sensitive seats, keep strict vigil of the working, update
the technologies employed periodically, and engage more than one person in large-value
transactions. Of course, internal auditors can continue to win the battle against frauds and
scams through the continued application of fundamentals, such as education, technological
proficiency, and support of good management practices. Close attention and vigilance on the
part of both banks and customers is, therefore, the best deterrence.
According to Freddie Mac (2015), “Fraud Mitigation Best Practices” include:
(a) Fraud Risk Management Policies and Procedures.
(b) Regulatory Compliance.
(c) Ethical Conduct
(d) New Employee Awareness.
(e) Training.
SIGNIFICATION OF STUDY

The banking institution as an engine for economic development is specially designed to carry
out contains duties which eventually benefits the following interest groups are

 Industrial sector

 Agricultural sector

 Individual customers

 Government or public sector

TYPES OF FRAUDS COMMONLY PREVALENT IN THE INDIAN BANKING

INDUSTRY

 Bribery and corruption

 Cybercrime

 Multiple funding

 Counterfeit cheques

 Terrorist Financing

 Data Security

 Identity theft

 Tunneling

 Money Laundering

 Loan loss

 Internet banking frauds

 Absence of collaterals

 Tax Evasion

 Fraudulent documentation

 Incorrect sanctioning

 Mobile Banking Risks

Some of Modern Frauds Its Solutions:

1) Wire Fraud
Solution: Artificial Intelligence
2) Credential Stealing
Solution: Biometric data
3) Account Takeover
Solution: Consortium Data
4) Money Laundering
Solution: High Tech Standardization
5) Accounting Fraud
Solution: Machine Learning
6) Multiple Funding
Solution: Watch out for internal fraud

According to the PwC Global Economic Crime Survey 2014, “cybercrime was one of the top economic
crimes reported by organizations across the world, including India.” According to Accenture (2015),
“”The key trend being seen across the banking industry is integration and optimization of fraud
management tools and capabilities” including the followings: Integration of IT security and fraud
management capabilities to address the increasingly technical

 nature of fraud attacks, as well as the impact of innovations in the banking sector, such as mobile
applications and payments. Greater use of social network analysis and cyber data mining to identify the
propensities of both new

 and existing customers to participate in fraudulent activities Updates to international payment fraud
controls.

 Consolidation of legacy systems, including cross-financial crime prevention toolkits.

 Strengthening of Fraud Control Framework for outsourcing contracts and off-shored services.

 Increased industry coordination and improved fraud reporting.

 Development of pan-channel solutions for customer on-boarding and ongoing ID&V.

 Desire to move to global solutions to deal with fraud and anti-money laundering problems, to reduce
the cost of financial crime prevention.

NEED OF THE STUDY

1) In a recent global banking fraud survey, cyber fraud was found to be the biggest challenge faced by
financial institutions today. To combat this banks and financial institutions are undertaking
a massive transformation across digital and mobile channels in engaging with their customers and
their use of artificial intelligence (AI).

2) Banks are combining machine learning with biometrics to provide new safer and secure
experiences, such as facial and fingerprint verification instead of passwords.

3) Furthermore, here are 3 ways banks can prevent digital banking fraud:

 Watch out for internal fraud

 Educate your customers

 Multi-Factor Authentication

To prevent such activity, banks must screen and audit employees. A bank’s ability to identify their
customers, monitor transactions, and raise the alarm about suspicious activity in real-time is of far
greater value.
OBJECTIVES OF STUDY

1. To understand the import role of bank in all types of industries in India.

2. To find which types of banks are involved in Indian banking system.

3. To find which types of benefits are providing to the customers in India.

4. To establish the cause of fraud and event that facilitates this act.

5. To find out the various forms and nature of commercial fraud that provide the system

6. To keep the general public aware of the hazardous effects of fraud in the banking industry.

7. To keep the management and its subordinate alert in a way to fight against fraud among back
employee they are customer shareholders and the general public.
8. To find possible solution and control means of fraud in the banking system in a bid to save the
economy raise the profitability of bank and to save the image of banking sector.
9. To Prevent Banking Frauds Use Modern Technology, banks must screen and audit employees.
RESEARCH METHODOLOGY & TOOLS

This study is basically depends on

1. Primary Data
2. Secondary Data

Primary data: The primary data collected from the different Banks through enquiry.
Secondary data: The secondary data collected from the different sites, broachers, news papers,
bank offer documents, different books and through suggestions from the project guide and from the
faculty members of our college.

TOOLS USED IN THIS PROJECT

The following parameters were considered for analysis:

 Tables
 Bar Chats
 Internet

 Banking Data

 Modern fraud analysis tools

ADVANTAGES OF THE STUDY

1) In India every sector is using the banking system in there day to day life.
2) From small scale industry to MNC companies also unsing the banking system from implineting
there amount savings and transfer process
3) This banking is used in agriculture sector bank loan, insurances, investments etc.,

4) Five ways to combat bank frauds are highlighted below as:

 Adopt appropriate technologies

 Beef up your internal controls

 Screen job applicants carefully

 Educate your workforce

 Educate your customers

 Prosecute thieves

 Watch out for internal fraud

 Multi-Factor Authentication
LIMITATIONS OF THE STUDY

1. The rapid development in information technology and globalization has serious impact on banking
practice in the country.
2. The study is limited only to the analysis types of frauds accrued in India it is not for
resolving the frauds.
3. The study is based on secondary data available from monthly fact sheets, web sites; offer
documents, magazines and newspapers etc., as primary data was not accessible.
4. The study is limited by the detailed study of various schemes in banking system.
5. The study doesn’t give complete solutions to the internal frauds of banking system.
6. The data collected for this study is not proper because some banks are not disclosing the
correct information.

7. This banking system is not utilized 100% for poor people, this banking system improving
the black money transactions

8. Unique risk is completely ignored in all the measure.

REFERENCES || FINDING SOLUTIONS || CONCLUSION ||
SUGGESIONS:
Will be submitted at the time of project final submission.