What could be the major elements responsible for the commission of frauds in banks?

The frauds can happen either by insiders or outsiders or in collusion. Any industry which is involved in financial dealings frauds will happen. However the PSBs are now highly sophistacted even compared to private or foreign banks in India. The PSBs have a rich traditional way of recruitments with proper back ground checks, rich traditional values, trust worthy personnel. The PSBs have also built in now fool proof mechanisms to arrest frauds by way of different in built policies or regulatory requirements. Even the loan processing of PSBs is also very strickt to in avoiding frauds or restrict the outside persons to defraud the banks. In a stiff competetition the latest entrant banks have gone from class to mass banking by way of heavy retail loans with improper processing/checks, which has led the outsiders encash the situation. So every bank has to realise that they should establish good policies and also have mechanism to implement the same to avoid frauds

The are many numbers loopholes in the assessments of individual repaying worthiness. in most of cases inflated market value are taken into account .It should be only with reference to Govt schedule rate .

The fault lies in recruiting of people by the HR department, which many a times recruit people who they know. So the person joining and functioning in the Bank feels secure enough to bend the rules. The HR department while recruiting overlooks many aspects of the people. It is mainly the character of the person you recruit that makes the difference.

I endorse your view regarding the havoc created by the DSA system. I have come across many DSAs of pvt. sector banks offering to get loans sanctioned without going to the bank ever.

You can experiment/experience this by calling up a DSA of used cars for car loans.

I need not mention the name of the banks except that they are huge pvt. sector banks.

You can imagine the size of asset bubbles created in home loans, car loans and personal loans running into lacs of crores in the country and the consequences on the common man.

The DSA system has not led to the frauds. The Bankers themselves take highly impossible targets from seniors. The they are not able to execute them. They just want to sit in the plush office. The Banking staff is to be blamed. 99% of them are lazy, fresh recruits from premier institutes of Management and they dont know anything about Banking. They are also afraid to do good proposals just because they dont understand the business and its intricacies. People in the advances department should be those who know how the markets function, because ultimately you are going to advance in these sectors only. Not only the financial markets knowledge but also the knowledge of the markets you are advancing to.

I believe you should look inwards before pointing fingers towards others. The attitude, laziness & lack of practical and Banking knowledge is what leads to such frauds.

Look every one is talking about the ways or the type or who generally the fraudesters are. But no one is looking into it from this perspective that why this habit of fraud is there in some individuals. Every one wants to make money. But a fraudester wants to make money through means which a normal human being fears to tread. Which shows that he is willing to take risks. So his this skill can be used to make him a big businessman. So we need to guide that individual only. This will let him take risks within lawfull parameters.

Restructuring happened and happens only in big loans. It does not happen to the ordinary Housing borrower who has lost his job, is between jobs or has had a wage cut. Housing companies like HDFC and the like now refuse to consider any re-structuring at all pleading RBI attitudes, and move in to grab middle class homes.

I believe that you are right. But I dont think you are entirely right in your assessment. Take for example the case recently when RBI did not allow restructuring of Real Estate Loans to Developers. RBI acted in the best manner possible. This might lead to the MIGHTY Builders Lobby going to FM, PM etc.. and the powers that may be, putting pressure on them to rescue the industry which is in Doldrums. Although the RBI may be right, the finance minister might give some relief. Because the builder's lobby is always heard, while the cries of common people are never heard.

Poor training is 1 of the major reasons. But dont expect the bank to provide the A-Z of all businesses. The best they can teach is the practises of that Bank. The best way is to judge the persons recruited and find out what they are best suited to do. Because just armed with a degree from a Pedigree Institute, a fresh recruit cannot in the wildest dreams, manage credit & that is what our Private & multinational Banks do. There has to be a program whereby all recruits are made to go through various activities of the Bank. The candidates may be good in area or another, not in all areas. The candidate best suited may be allocated to that department. This may take some time, maybe a year but then by that time, the recruit will have a good knowledge of all departments and some experience. Hence, they will be more alert and will not easily fall for frauds.

You are right, but only partly. Most people dont know the banking system inside out. It is mostly people on the inside who provide them with the loopholes, because they are too lazy to go out and source business, and when their targets are not met and they expect firing from superiors, they take anything and everything that comes their way. Hence the fraud.

Having to pay for an account statement at PSB? that is ridiculous. Most PSBs are accessible online where you can see the statement of account. Unionisation may be a problem for the Bank and not the customers. Unionisation has been there from the time the banks were nationalised. What you want to convey is not clear at all and if at all the instance that you have given is true, it is a one off incident that happens but not a regular feature. In my working life of 18 years with banks of all types, I have never seen such a thing happening anywhere in India. I have worked across many states and as far as PSBs are concerned it is not true. Infact the PSBs have become more customer friendly after encountering competition from MNC & private Banks.

What you have to say regarding land mafia is true. That they acquire properties cheaply from PSBs. But then if you consider the bank's point of view, then the land mafia pays them for the loan advanced. Sometimes the discount may be heavy, but then the employees of Banks also have to face an audit, whereby they will be questioned. Sometimes the defaulter can go to court suing the bank for disposing off his property cheaply.

Hence you see, that the grass is not green on the other side. There is a vigilance department in every bank.

1. Recovery procedures are abused by PSBs also. They too have Recovery and Enforcement agents now. Grabbing housing property is indulged in also by PSBs and State Financing Corporations.

2. The major issue with PSBs is large scale corruption. Even to get a Statement of Account, business clients are forced to pay. What , then, of loans?

3. Unionisation is the major bane of PSBs. You cannot trust them to serve you on all days. Union leaders indulge in and protect corruption. Corruption leads to protection of fraudsters.

I dont really think that people are shying away from Banks. What you say about the ICICI culture stands true only for Private Banks and Multinational Banks. Our PSU banks are always law-abiding and more often than not take a linient and humanistic approach. What you are talking about is arm-twisting of consumers taking place in the Banking Industry. But that is prevalent in the Co-operative Banks too. They take advantage of the Co-operative Laws to arm-twist the customers.

Your argument is true. But the most important part is knowledge of actual business activity of customer applying for credit facility. In the case of Nationalised banks, most bankers have a database of clients doing the same activity as the loan seeker. They can tap this data and ask for an informal report of the client i.e. his reputation in the business as well the way in which he/she pays their creditors. I think this should provide a good measure of the way the loan seeker conducts business, which will serve a good yardstick as to how they will repay the bank. In case the loan seeker is a fraud, the existing customers from the same line of business will have no track of him. In that case, the banker can ask the client to provide them with references from the people in his line of business.