Evaluating frauds in the Indian banking industry

Abstract

This paper endeavours to evaluate the frauds in the Indian financial sector. This is achieved through firstly a brief study of global financial crises, 2008 and the subsequent reforms introduced in US to develop an understanding of the regulatory framework. Subsequently the major financial scams in India were studied and the regulatory framework in India was analysed. It was concluded that due to adequate and healthy regulation in India, the scenario similar to US which arose because of overindulgence of the financial intermediaries like banks in the financial markets space, is unlikely. Rather, frauds need to be studied more from the perspective of Non-Performing Assets, industrial, macroeconomic and political environment and Corporate Governance issues. Through the study of various publications by the Reserve Bank of India, and other Committee Reports, the paper evaluates the key recommendations and conclusions and builds upon it by a series of interviews with Chairmen and Managing Directors of major Indian banks, Credit Agencies, Chief Vigilance Officers, CBI officials, Industry personals and several other stakeholders involved in the banking value chain. The paper also touches upon the case of rising Non-Performing Assets in the past 5 to 6 years across the various Scheduled Commercial Banks especially the Public Sector Banks. Also attempt has been made to study the banking frauds in last ten years qualitatively and also quantitatively by analysing data from various Government and RBI sources. The report finally proposes key recommendations and conclusions to reduce the future occurrence of frauds in the Indian banking sector.