Frauds could cost banks heavily and most of them stem from the operations of banks themselves. While eliminating them is very difficult, frequency of frauds can be reduced by strict surveillance. RBI has set up a Board of Financial Supervision to check and control this menace. It has also issued KYC (Know Your Customer) norms to check frauds. Besides, Basel II also includes frauds in its draft as an operational risk.

"Police have cautioned chartered accountants on the increasing number of bank frauds and advised the auditing profession to effectively monitor banking transactions accounts to prevent major losses to public at large."

This was the news items published on 21.03.2005 in one of the financial dailies from The Hindu group of publications under the heading "Alert on bank frauds".

Like corporate frauds, bank frauds are not a new phenomenon, it was always there and it will always be there because need and greed of people will take care that these acts don't become extinct. What is more serious is the ever increasing span of frauds-whether in quantity or severity of such frauds which is mind-boggling.

Along with other bludgeoning problems which banks are facing today-ever increasing pressure to reduce transaction cost and, bad and Non performing assets; cut throat competition; BASEL-II & KYC requirements and such other regulatory and operational requirements; lower yield on Treasury Investment, huge capital expenditure on technology initiatives (which have become inevitable for the very survival of banks) and consequent pressure on banks profitability and resources/infrastructure, banks are now also facing the bigger menace of ever increasing incidence of frauds being committed by insiders as well as outsiders.

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