X-FIN, the Finance Association of XIMB organized their annual business conclave FINOMICS 2018 on 12th August 2018, Sunday, 10 a.m. The topic of discussion for the conclave was “Bank Frauds: A Chronic Malaise”. The speakers for the occasion were Mr. Dasarathi Mishra (Former Chief General Manager, RBI), Mr. Jay Shankar Shrivastav (Chief Economist and Director, Religare), Mr. Satya Shankar Mahapatra (Senior Vice President, Barclays Risk, and Analytics) and Dr. D.V. Ramana (Director IMT Hyderabad).


Mr. Dasarathi Mishra was the first speaker and he started with a brief history of the banking systems, how the financial system has developed over the past 3 decades and how fraudulent measures have always attempted to hinder the growth of the economy. Then he classified the different types of frauds and stated that “failure of the internal control system and delinquent behavior by the banking professionals” is a major reason why frauds are continuously growing and plaguing the economy.


The next speaker, Mr. Jay Shankar Srivastav, threw the limelight on a vital argument that how bank frauds are different from the rest of the frauds happening in other sectors, primarily because bank frauds “affect a large number of small savers”, “impact the whole gamut of economic activity, thus slowing down the growth” and how unlike other sectors, here “the bailouts happen with the tax-payers money” and are not compensated by any other source. He went on to analyze credit risk and operations risk and opined that operations risk is the root cause of bank frauds. He also formulated a number of solutions as a measure to control bank frauds such as maintaining a “Super-regulatory body” since R.B.I. is over-burdened with responsibilities, establishing dedicated verticals within banks to monitor frauds and ensuring safety and security of whistle-blowers.    


Mr. Satya S. Mahapatra dived into the global situation on bank frauds and said that “frauds are a global phenomenon”. He analyzed many case studies and the Fraud Triangle to understand the rationality behind the behavior of people engaging in such activity. He also portrayed the Adaptive Security Architecture that can be used to prevent fraudulent activities and added that there are 5 layers of fraud prevention, among which the most important being “continuously updating and refining models”. He also opined that “fraudsters just have to be successful once but a defender has to be successful every time!” 


The final speaker to grace the stage was Dr. D.V. Ramana, professor of XIMB (on leave) and currently acting as the director of IMT Hyderabad. He took a slightly different approach to the topic by stating that there is no such phenomenon as Bank fraud in particular. He explained how NPAs (non-performing assets), fraud and twin balance sheets are interlinked. “NPA is a visible manifestation of fraud,” he said, whilst elucidating on how financial institutions are concerned of NPAs due to the effect it will have on twin balance sheets.


He explained that the main concerns in the area of fraud are not bank frauds but corporate frauds. “Bank’s problems are not valuations but values”, he said in lieu of this topic. He concluded by stressing on the importance of operational optimization; “Neither education nor technology can fix the operational problems”, he said.


The speeches were followed by an interactive QnA session with the audience. The event concluded with a vote of thanks, given by Dr. Banikanta Mishra (Professor, XIMB). The event also marked the release of “FINSHASTRA” the annual finance magazine by X-FIN.

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