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1. ACADEMIA Letters
Assessment of Financial frauds: A Study on Emerging
issues among Private vs Public Sector Banks in India
Gudimetla satya Sekhar, GITAM DEEMED TO BE UNIVERSITY
TIRUMALA RAJU NAVEEN, CANARA BANK
Introduction
Financial frauds in public and private banks not only impact the growth and progress of the
banking sector but also adversely impact the economic conditions of the entire country. The
banking sector is considered as the core industry of the economy that provides robustness
to the country and determines its production and consumption activities. When the banking
sector is hit by financial frauds, it adversely impacts the bank’s performance and its produc-
tivity (Khanna and Arora, 2009). The current research assesses financial fraud in India by
considering the perception and emerging issues of both private and public sector banks.
The Indian banking system has been facing various issues viz., financial reporting frauds,
non-performing assets, credit card debts, cyber frauds, identity theft fraud, and misappropria-
tion of assets (tangible and intangible) that adversely impact its productivity and performance
levels.
As per the recent statistics released by the Reserve Bank of India, scheduled commercial
banks and select Financial Institutions have reported 84,545 incidents of fraud involving a
total amount of Rs 1.85 lakh crore during 2019-20, out of which more than 85% of frauds
have been recorded in the public sector banks in the form of misappropriating share and 65%
to 75% loss in the form of business share (credit and deposit loss).
Academia Letters, July 2021
Corresponding Author: Gudimetla satya Sekhar, gudimetlavss@yahoo.com
Citation: satya Sekhar, G., Naveen, T.R. (2021). Assessment of Financial frauds: A Study on Emerging issues
among Private vs Public Sector Banks in India. Academia Letters, Article 1714.
https://doi.org/10.20935/AL1714.
1
©2021 by the authors — Open Access — Distributed under CC BY 4.0

2. Review of Literature
Albrecht’s (1996) study reveals that the symptoms of poor internal controls increase the like-
lihood of fraud. Haugen and Selin (1999) examined that internal control techniques must
be implemented by public and private banks so that risks of financial frauds faced by them
reduce. Wilhelm (2004) analyzes the fraud management lifecycle which can be used to encap-
sulate the process of fraud prevention. The deterrence stage involves activities that hinder or
discourage fraud through fear of consequences (Wilhelm, 2004; Webster, 1997, 1976, 1941).
On the other hand prevention activities hinder, check, keep away or stop the fraudster from
committing fraudulent activities.
Beirstaker, Brody, Pacini (2005) proposed numerous fraud protection and detection tech-
niques. Willson (2006) analyzed that challenges such as failure in management supervision,
and insufficient actions against warning signals lead to financial fraud in the banking organi-
zation.
Sukanya Kundu and Nagaraja Rao (2014) analyzed the prevalence of financial fraud in
India. The study highlighted that due to fraud, the image of the organization gets tarnished
and there is a reduction in the efficacy of employees.
Anthala (2014) has analyzed a few cases and revealed that public bank employees and
outsiders are playing a vital role in banking frauds.
Madan Lal Bhasin (2015) analyzed the risks and consequences of financial fraud in the
Indian banking sector. As per the study, it was found that with the growth of the banking sector
in India, there was an increase in fraudulent activities such as scams, accounting fraud, rogue
traders, demand draft fraud, and others within the banking sector. The regulatory supervisory
members such as internal auditors, external auditors, committee members, shareholders, and
board of directors did not perform their responsibilities well which led to a rise in financial
frauds within banking organizations.
Singh and Nayak (2015) conducted interview-based research on Frauds in Banking and
they revealed various reasons for unethical practices existing in the financial industry. The
financial industries are massive in size, complex in design, and also have a global reach.
Yego (2016) founded that fraud is recognized as a crucial crisis within the bank, even sup-
posing the relative extent of fraud conducted was simple and comparatively small. Currently,
most of banks use standard procedures to detect and prevent fraud. However, these procedures
do not perform well. The Fraud Triangle (FT) functioned energetically to identity the motifs
of bank frauds explained by the respondents.
Swain, D. S., &Pani, D. L. (2016) conducted a trend analysis on frauds in the banking
industry in India and revealed that inefficiency and inexperience of staff caused many banks
Academia Letters, July 2021
Corresponding Author: Gudimetla satya Sekhar, gudimetlavss@yahoo.com
Citation: satya Sekhar, G., Naveen, T.R. (2021). Assessment of Financial frauds: A Study on Emerging issues
among Private vs Public Sector Banks in India. Academia Letters, Article 1714.
https://doi.org/10.20935/AL1714.
2
©2021 by the authors — Open Access — Distributed under CC BY 4.0

3. to seem to have compromised in KYC norms and innovation in the banking arena.
Pooja(2017) analyzes that financial fraud has become a concern for banking organizations
as it adversely impacts their commercial workings and reputational image in the market.
Anju Rohilla, et, al. (2017) examined that most of the financial frauds that are faced by
the public and private sector banks in India are in the form of loan and advances. Due to an
increase in loan and advances frauds, the issue related to non-performing assets (NPAs) is
high among the banks in India.
Venkata Ramana and Gopi Krishna (2017) examined that initially the financial fraud in the
banking sector was denoted as inflated assists, insider trading, and stock manipulation. How-
ever, with the advancement of the banking sector, new financial frauds such as bill discounting
fraud, payment card fraud, prime bank fraud, and wire transfer fraud have also emerged in the
sector.
Neha Sharma and Dhiraj Sharma (2017) conducted a study to determine the impact of
employee awareness in the reduction of financial frauds. The study examined that due to
challenges such as insufficient training, work pressure on employees, work-life imbalance, lack
of compliance, and industry competitiveness, it often becomes difficult for the employees to
think or act beyond their regular organizational tasks and identify probable financial fraudulent
risks.
Ghosh (2020) examined that the financial loss in the global bank was recorded to be US$
320 billion in the last decade while the banks in the European country experienced a loss of
US$ 60 billion during 2012-2016 owing to financial frauds.
Conclusion
The research is expected to provide a comprehensive overview of the emerging issues of both
private and public banks in India concerning financial frauds. The facts related to financial
frauds within the Indian banking sector have been limited and did not provide much informa-
tion about the challenges that are faced by them. The research also contributes towards the
enhancement of the functioning of banks by directing the attention of policymakers towards
making stringent rules against fraudsters.
Academia Letters, July 2021
Corresponding Author: Gudimetla satya Sekhar, gudimetlavss@yahoo.com
Citation: satya Sekhar, G., Naveen, T.R. (2021). Assessment of Financial frauds: A Study on Emerging issues
among Private vs Public Sector Banks in India. Academia Letters, Article 1714.
https://doi.org/10.20935/AL1714.
3
©2021 by the authors — Open Access — Distributed under CC BY 4.0

4. REFERENCES
Anju Rohilla, Dr. Ipshita Bansa (2017), Combat Loan & Advance Related Frauds –A Study
of Indian Banking Sector, International Journal of Research in Finance and Marketing
(IJRFM), Vol. 7 Issue 6, June, pp. 26-36
Dr. Madan Lal Bhasin (2015), An Empirical Study of Frauds in the Banks, European Journal
of Business and Social Sciences, Vol. 4, No. 07, P.P. 1-12
Dr. S Venkata Ramana, Dr. S Gopi Krishna (2017), A study on the impact of fraud in Indian
banking sector (With special reference on retail banking products), International Journal
of Academic Research and Development, Volume 2; Issue 6; November; P.P. 544-547
Ghosh, S. (2020). Financial misconduct in Indian banks: what matters and what doesn’t?.
The Journal of Risk Finance.https://www.emerald.com/insight/content/doi/10.1108/JRF-
08-2019-0146/full/html
Haugen, S. and Selin J.R.(1999). Identifying and controlling computer crime and employee
fraud. Journal
Khanna, A. and Arora, B. (2009). A study to investigate the reasons for bank frauds and
the implementation of preventive security controls in the Indian banking industry, Inter-
national Journal of Business Science and Applied Management, Vol. 4, No. 3
Neha Sharma, Dr. Dhiraj Sharma (2017), An Empirical Study on Banking Frauds in India
with a special reference to the role of Employee Awareness in Banking frauds, Interna-
tional Journal Of Business Management, VOL. 3 Issue 1
Pooja, M. An Empirical Study on the Impact of Banking Frauds in the Development of Indian
Economy: With Special Reference to Public Sector Banks.https://ijemr.in/wp-content/
uploads/2019/08/An-Empirical-Study-on-the-Impact-of-Banking-Frauds-in-the-Development-
of-Indian-Economy.pdf
Raju, Y. B. (2014), “Healthy banks under healthy Regulation
Singh, C., Pattanayak, D., Dixit, D., Antony, K., Agarwala, M., Kant, R.,…& Mathur, V.
(2016). Frauds in the Indian banking industry. IIM Bangalore Research Paper, (505).https:/
/www.iimb.ac.in/sites/default/files/2018-07/WP_No._505.pdf
Sukanya Kundu, Nagaraja Rao (2014), Reasons of Banking Fraud – A Case of Indian Pub-
lic Sector Banks, International Journal of Information Systems Management Research &
Academia Letters, July 2021
Corresponding Author: Gudimetla satya Sekhar, gudimetlavss@yahoo.com
Citation: satya Sekhar, G., Naveen, T.R. (2021). Assessment of Financial frauds: A Study on Emerging issues
among Private vs Public Sector Banks in India. Academia Letters, Article 1714.
https://doi.org/10.20935/AL1714.
4
©2021 by the authors — Open Access — Distributed under CC BY 4.0

5. Development (IJISMRD), Vol. 4, Issue 1, Jun, P.P. 11-24
Willson, R. (2006). Understanding the offender/environment dynamics for computer crimes.
Information Technology and people Vol,19, No.2, pp170-186
Academia Letters, July 2021
Corresponding Author: Gudimetla satya Sekhar, gudimetlavss@yahoo.com
Citation: satya Sekhar, G., Naveen, T.R. (2021). Assessment of Financial frauds: A Study on Emerging issues
among Private vs Public Sector Banks in India. Academia Letters, Article 1714.
https://doi.org/10.20935/AL1714.
5
©2021 by the authors — Open Access — Distributed under CC BY 4.0