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Bank Fraud & Non-Performing Assets (NPAs)

PYQs

8

Articles

1

Momentum

21

Phase IFoundation

Background

Overview

Understanding the causes, consequences, and measures to combat bank fraud and NPAs is vital for assessing the health of the Indian economy, banking sector reforms, and financial stability.

Bank fraud refers to the illegal acts committed by individuals or entities to illegally obtain money or assets from banks, often through misrepresentation or misuse of loan funds. Non-Performing Assets (NPAs) are loans or advances for which the principal or interest payment remained overdue for a period of 90 days.

Phase IIStatic core

Facts & tables

Key facts

Impact

Leads to significant financial losses for banks, impacting their profitability and lending capacity.

Causes

Often involves misrepresentation, misuse of funds, and sometimes collusion between borrowers and bank officials.

Consequence

Contributes to the accumulation of NPAs, a major challenge for the Indian banking sector.

Mitigation

Addressed through regulatory measures by RBI and investigations by agencies like CBI/ED.

Reference table

Static syllabus anchors

TypeReference
Conceptual areaIndian Economy

Reference table

Institutions & roles

BodyRole
Reserve Bank of IndiaRegulates
Public Sector BanksAffected party
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Multi-statement analysis

Prelims angle: Institutional roles and functions

Quick revision

  • Illegal acts to obtain funds from banks.
  • Often results in Non-Performing Assets (NPAs).
  • NPAs: loans overdue for >90 days.
  • Impacts bank profitability and economic stability.
  • Addressed by RBI regulations and investigative agencies.

Elimination traps

Authority vs ministry — Distinguish between RBI's regulatory role and government's policy role in addressing NPAs.

Ministry sets policy; regulator often has quasi-judicial powers.

High-confidence PYQs

2024Factual recall, Multi-statement analysis

With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements: 1. There is no minimu...

EconomyOpen question
2021Multi-statement analysis, Institutional roles and functions

In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following? 1. Lending to trade and industry bodies when t...

EconomyOpen question
2020Multi-statement analysis, Factual recall

With reference of the Indian economy, consider the following statements: 1. ‘Commercial Paper’ is a short-term unsecured promissory note. 2. ‘Certificate of...

EconomyOpen question
2019Conceptual understanding, Terminology-based question

What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

EconomyOpen question

Which of the following is not included in the assets of a commercial bank in India?

EconomyOpen question
2019Purpose or function of a policy tool, Conceptual understanding

What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

EconomyOpen question

Which of the following is not included in the assets of a commercial bank in India?

EconomyOpen question
2018Factual recall, Multi-statement analysis

With reference to the governance of public sector banking in India, consider the following statements 1. Capital infusion into public sector banks by the Go...

EconomyOpen question
2016Multi-statement analysis, Factual recall

The establishment of “Payment Banks’ is being allowed in India to promote Financial Inclusion. Which of the following statements is/are correct in this conte...

EconomyOpen question
2013Factual recall, Institutional roles and functions

Which of the following grants/ grant direct credit assistance to rural households? 1. Regional Rural Banks 2. National Bank for Agriculture and Rural Develop...

EconomyOpen question

Topic timeline

Indian Economy
Prelims 2013· Factual recall, Institutional roles and functions

Which of the following grants/ grant direct credit assistance to rural households? 1. Regional Rural Banks 2. National Bank for Agriculture and Rural Develop...

Open question
Prelims 2016· Multi-statement analysis, Factual recall

The establishment of “Payment Banks’ is being allowed in India to promote Financial Inclusion. Which of the following statements is/are correct in this conte...

Open question
Prelims 2018· Factual recall, Multi-statement analysis

With reference to the governance of public sector banking in India, consider the following statements 1. Capital infusion into public sector banks by the Go...

Open question
Prelims 2019· Conceptual understanding, Terminology-based question

What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

Open question

Which of the following is not included in the assets of a commercial bank in India?

Open question
Prelims 2019· Purpose or function of a policy tool, Conceptual understanding

What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

Open question

Which of the following is not included in the assets of a commercial bank in India?

Open question
Prelims 2020· Multi-statement analysis, Factual recall

With reference of the Indian economy, consider the following statements: 1. ‘Commercial Paper’ is a short-term unsecured promissory note. 2. ‘Certificate of...

Open question
Prelims 2021· Multi-statement analysis, Institutional roles and functions

In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following? 1. Lending to trade and industry bodies when t...

Open question
Prelims 2024· Factual recall, Multi-statement analysis

With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements: 1. There is no minimu...

Open question

Court allows CBI to arrest former Reliance ADAG executive Jhunjhunwala in bank fraud case

02 Jun 2026 · Bank fraud involves illegal acquisition of funds from banks, often leading to NPAs (loans overdue >90 days), impacting banking sector health and requiring strong regulatory and investigative action.

Read article

Related topics

Current topic

Bank Fraud & Non-Performing Assets (NPAs)

Often confused with

Corporate Governance

Open notes

Practice writing on this topic

UPSC has asked 8 linked questions on Bank Fraud & Non-Performing Assets (NPAs) in Mains. Write an answer to one — and get it evaluated.

See Mains PYQsEvaluate an answer
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