Leadership Effectiveness, Sustainable Performance and Banking Fraud: A Conceptual Framework

Abstract

Objective of the Study: The present research proposes a literature review on types of banking frauds in the Indian Banking sector and would posit a probable relationship in between leadership effectiveness and such events. Scope: In Financial Year 2022-23, the Indian banks reported 9,102 cases of frauds involving an amount of INR 603 billion, as reported by the Reserve Bank of India (RBI). As per the RBI, these fraud cases were mostly committed by the employees. Moreover, RBI received 3.04 lakh complaints from the aggrieved customers at RBI Ombudsman offices. The highest number of complaints was received by the largest public sector bank—the State Bank of India. These facts pose some burning questions such as “What could be the reasons behind such increasing cases?” “Was the adverse economic situation to be blamed or it was a case of bad management?” “Does leadership have any role to play towards such events?” “Does high profile fraud cases affect the brand image of a bank?” “What could be the way forward to reduce such cases and increase efficiency of the overall banking industry?” “What measures should be taken to bring in sustainability in the Indian banking system?” And the present research aims to propose a conceptual framework to answer such questions. Methodology: Review of literature by search, appraisal, synthesis and analysis of existing literature on leadership issues and sustainability of the Indian banking system. Results & Conclusion: A thorough literature review reveals that frequent fraudulent acts are one of the critical challenges bothering sustainability of the Indian banking sector and managerial board or the senior leadership plays a significant role in improving bank’s performance by setting up the necessary policies and practices to restrict bank frauds. While leadership might exert a direct positive impact on both sustainable banking performance as well as profitability, sustainable banking might act as a mediator between leadership and the bank’s profitability. Conversely, potential for fraud might act as a moderator weakening the relationship between leadership and profitability as well as sustainable performance and profitability. This article proposes a conceptual framework taking consideration of the constructs—leadership effectiveness, sustainable performance, bank’s profitability and potential for fraud.

Keywords: Indian Banking Industry, Bank Fraud, Sustainable Banking, Banking and Economy, Leadership Effectiveness

View PDF