Banking System In India

1.INTRODUCTION

Banking system is the backbone of any nation’s economy, so it is very important to have a system with the lack of failures. In the repid growth in the Indian banking system we also found growth in the bank scams in India. As the banks always deal with money, temptation is high for some of those associated with banks to find out loopholes in the system to make personal gains fraudulently. This is especially true for developing countries like India. "The banks are the lifelines of the economy and play a catalytic role in activating and sustaining economic growth, especially, in developing countries and India is no exception," S S Mundra, deputy governor of the Reserve Bank of India said in a speech recently.

With the nationalization

EVOLUTION OF BANKING SYSTEM IN INDIA:

Banking system occupies an important place in a nation’s economy. A banking institution is indispensable in a modern society. It plays a pivotal role in economic development of a country and forms the core of the money market in an advanced country.

Banking industry in India has traversed a long way to assume its present stature. It has undergone a major structural transformation after the nationalization of 14 major commercial banks in 1969 and 5 more on 15 April 1980.

Banks are the engines that drive the operations in the financial sector, which is vital for the economy. With the nationalization of banks in 1969, they also have emerged as engines for social change. After Independence, the banks have passed through three stages. They have moved from the character based lending to ideology based lending to today competitiveness based lending in the context of India 's economic liberalization policies and the process of linking with the global economy.

A sound banking system should possess three basic characteristics to protect depositor’s interest and public faith. Theses are

(i) a fraud free culture,

(ii) a time tested Best Practice Code,

The banking system in our country has been taking care of all segments of our socio-economic set up. A bank fraud is a deliberate act of omission or commission by any person carried out in the course of banking transactions or in the books of accounts, resulting in wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the bank.

BANKING FRAUD:

Fraud is any dishonest act and behaviour by which one person gains or intends to gain advantage over another person. Fraud causes loss to the victim directly or indirectly. Fraud has not been described or discussed clearly in The Indian Penal Code but sections dealing with cheating, concealment, forgery counterfeiting and breach of trust has been discusses which leads to the act of fraud.

In Contractual term as described in the Indian Contract Act, Sec 17 suggests that a fraud means and includes any of the acts by a party to a contract or with his connivance or by his agents with the intention to deceive another party or his agent or to induce him to enter in to a