Published Paper Details:

The strength of any banking system is fundamentally reliant on sound and effective practices for managing credit risk; strong governance and sound management practices, followed by transparency of financial practices. Banks have recently experienced major challenges as a result of the increasing incidence of Financial Fraud as well as also Non-Performing Assets (NPAs), particularly in the area of Co-operative banking. This research examines Governance Failures and systemic weaknesses leading to the failure of cooperative banks, with a focus on one case study, the New India Co-operative bank financial fraud discovered in 2025 when more than INR122 crore was discovered to be misappropriated and NPAs of over INR400 crore existed. The investigation by the Reserve Bank of India revealed there was much scrutiny to prevent these failures from occurring; however, through lack of due diligence on the part of borrowers, continued processes to approve irregular loans, and due to collusion within institutions there were gaps in Internal Controls/Processes; Supervisory Gaps. The researcher adopted a case study-based qualitative exploratory method; and primarily utilized secondary data sources including regulatory reports, financial statements, and previous published literature. The case study indicates that weak internal controls, poor audit processes, and lack of on-line access contributed to the accumulation of NPAs and delayed detection of fraud by banking institutions. As a result, the researcher presented a new conceptual framework (based on Technology with Artificial Intelligence (AI) and Machine Learning (ML)) to be implemented by Banks to Improve Credit Risk Assessment, Enhance Early Detection of Fraud, and Improve Overall Governance/Control of Banking Institutions.