The Nirav Modi case has once again cast the spotlight on the dark corners of the Indian banking universe. The authorities should not let this crisis go waste, but use it as an opportunity to minimize the risk of such frauds in the future. Here are some ideas that could be considered. First, the basic line of defence against fraud is the internal controls in a bank. Technology should be seen as a game changer. Second, banks can also set up a special fraud monitoring agency, with officials specially trained to detect incipient frauds. Third, the role of third parties such as chartered accountants, auditors, and advocates who figure in bank frauds should also be examined with a tough eye. Fourth, banking regulators need to be a backstop. Fifth, in order to make the banking system more efficient, the government should actively pursue the idea of privatizing public sector banks (PSBs), as the required reforms will go the distance only when banks are free of political and bureaucratic control.

(Live Mint)