I. Introduction
Banking industry in one of the oldest industry of the world. The first activity of banking
is way back in 2000 BC in Assyria and Babylonia then continued in Greece and during
Roman Empire era1. Bank is known as a financial institution, which serves as a financial
intermediary among various components of our society. According to Oxford Dictionary,
bank is a financial establishment which uses money deposited by customers for investment,
pays it out when required, makes loans at interest. Bank have many functions, and it divided
into three big functions which are Primary or Traditional Functions, Agency Functions and
General Utility Functions.
Primary/Traditional Functions
Agency Functions General Utility Functions
Accepting Deposits Advancing of
Loans
Fixed Deposits
Account Cash Credit Payment of cheques, bills and
letters of credit
Security of Wealth and
Assets
Current Account Loans and Advances Receiving Payment for
customers
Arrangement of Travellers
cheques and letter of credit
Saving Account Overdraft Payment on behalf customers Information relating to
Economic Position
Home Safe Account Discounting of Bills Transfer of money Financial Adviser
Indefinite Period Purchase and sale of shares
securities Publication of Information
Deposits Account Function of manager, Trustee
and Executor Accepting of Bills
Other Deposits Underwriting Functions Security of loans
Other Functions Personal Credit
Management of Public Debt
Share market function
Management of Foreign
Exchange
Source : – I.V Trivedi, C.M Chaudhary and S.B Kumar (2010) INDIAN BANKING SYSTEM. Jaipur : Ramesh Book Depot.
p. 16
Banks are judged by their ability to develop financial instruments such as complex
derivatives and sophisticated credit schemes that help connect the money of investors with
the companies in need of those financial resources in the best possible way. In pursuing these
ends, banks, and financial institutions in general, have long defended the confidentiality of
the information pertinent to their business, be it data about their clients, the sources and the
destinations of the economic resources they handle, their credit-giving policies and
procedures, and many more aspects of the banking profession that tend to be little transparent
and not very communicative about their way of doing business. Given the fact that money
can be used in a wrong way and it frequently does get used in such a way and considering
that money is eventually funded to a very large extent by individual investors might lead a
1 K.A Goyal and V Joshi
1
bank to do some unethical practices and it will harm everyone, staff and customers, since
banking activities involve mostly everyone in our society.
How banks use money is not irrelevant from a moral and ethical perspective. Crime,
pollution, corruption, violation of human rights, threats to human life, totalitarian regimes,
and all sorts of wrong-doing need and use money every year. Financial institutions play a key
role in the supply and movement of money. Banks can channel economic resources in
different ways that make money result in some form of evil-doing. The two main ways in
which banks can do this are (i) by lending money to others, that is, by issuing credit facilities
to their clients, these being customers corporations, governments, individuals, etc., and (ii) by
actively and directly investing money, that is, owning shares, be it in the name of others or
for themselves, in companies, projects, or countries, that conduct different forms of wrong-
doing. The public seems to have the perception that the financial services sector is more
unethical than other areas of business. The misperceptions persists for several reasons. First,
the industry itself is quite large so it encompasses banks, securities firms, insurance
companies, mutual fund organizatios, investment bank, pension funds and any comapny
doibg business in the financial area. Because of ts large size, the industry tends to garner lots
of headlines which most of its ethical lapses. Then, the industry is also highly regulated, so
it’s likely that a higher percentage of these bad transactions are identified and reported, more
than other regulated industries. In the section III and IV we will discuss about ethical issues
that facing banking industry and what are the solutions and challenges that we can suggest
from our analysis.
II. Methods of Gathering The Data
Research method is a scientific tools to collect data with particular purpose. The
qualitative method will be use in this paper. Qualitative method stressed in process rather
than the result, so the writer will be more focus into its process, purpose and understand the
phenomenon through words and pictures2. This method involved interpretive, naturalistic
approach towards its material and try to interpret a phenomenon and to understand the
meaning behind3. The purpose of qualitative method is to deliver a full understanding of a
complete, contextual and detail data. This research will be more stressed on a ‘holistic’
