Unethical Practices in finance and its  causes:

The unethical practices in accounting are generally found in proprietarship and partnership business and it is lower in public limited companies and MNCs as compared to proprietarship and partnership.

Some of the unfair practises are:-

The Chit Funds Scams:

 chit fund companies frauds are not new in a country where 40% people do not have bank account. The only case of Sahara stands an odd one due to Supreme Court to safeguard small investors. It is intresting to know that chit fund scam was not able to expose 16 ponzi firms due to failure of crime branch 

to provide details of such firms. 

Due to lack of faith on formal financial system, only 6% of household saving is invested  into mutual funds and equity. Only a few cases like Sahara, Saradha and Pearls 

come to the media attention .

Pearl group case is estimated to be worth Rs 51000 crore.
 Rose Valley has been found to be involved in cheating Rs 17000 crore of innocent investors. iCORE raised Rs 7000 crore from investors . 

Deducting Money without Consent of account holder lead to a case in coimbatore consumer court lead to ordered a bank to pay compensation of Rs 14000 for deducting Rs. 12 from bank account of an individual without consent for insurance premium.Banks also face criticism from RBI and IRDAI for such practises.

Miss-selling

Miss-selling is a becoming a preferred unfair means of banks. They have emerged as the big culprits in mis-selling (Singh, 2016). SEBI has issued cause notice to HSBC bank in case of Suchitra Krishnamoorthi for unsuitable mutual funds selling and taking commission from them. Krishnamoorthi lost Rs 2 crores out of Rs. 4 crores wealth being managed by HSBC . The complaint was filed first to the banking  but it was rejected. Later money life foundation emailed to all three regulaors instead of doing anything IRDAI simply passed an statemenet  and Tata AIA 

response (Basu, 2014). SEBI also threatened the HSBC bank to stop him  as a distributor and ban HSBC from securities market. It was second time SEBI has ventured into the territory of RBI. 

Sumit Bose Committee recommended that for every financial product there should be a single sheet on which all important disclosures about the product are made in clear and large font size. It should also be stated why the product is suitable for the customer based on his/her age, income and risk profile. The sheet should be signed by the seller .

Factors Responsible for Unethical Practices in Financial Services:

Political Colonialism-

End of British Colonialism led India with empty , which is latter filled by politicians

Politicians  became the controller of resources, in collaboration withindustrialist and investigating agencies.  The perpetrators of crime and fraud are given the responsibility to investigate their own crime. The investigation is a cover up 

to show to innocent voters and citizens that a law & order and investigation machinery exists in the country. All the files get closed after some time and no conclusive results ever achieved in any major investigation. The innocent voters forget the scams after some time and the business 

of political colonialism (in collaboration with bureaucrats and industrialist) continues as usual.

Judicial Constraints-

In India there are more than three crore pending cases in Indian judicial system . Even if a brave innocent investors duped by fraud chit funds companies, files a complaint in a court, there is little chance that the case will come for hearing in the lifetime of the complainant. Similarly fraud chit fund operators are aware of the possibility of their case not 

coming up for hearing in their lifetime this motivates them to continue to indulge in such activities because of little possibility of getting punishment while alive. Judicial constraints act as an advantage for fraudulent chit fund companies and disadvantage for innocent small investors. 

In a country with surplus talented manpower, it is ironical that there is acute shortage of judges. 

The shortage is planned policy of politicians to keep the judicial system in resource constraints so that the backlog of cases can never be cleared and the politicians can rule the country in nexus 

with corrupt bureaucrats and unethical businessmen without any fear of being ever summoned by any court of law as their case will never come up for hearing in their lifetime due to backlog of 

cases, and if it appears in any court of law, the hearing will most likely never reach any conclusion. Judicial constraint is artificially created by politicians to protect their own corrupt rule from fair judicial system of country. 

Cultural Barriers-

The Indian culture is dominated by preference to caste, ethnic and religious sentiments over 

integrity and honesty of political candidates in election market. Indian voters have only one criteria to decide whom to vote and that is caste (in a broader sense including ethnic, religious belonging), even if the candidate is involved in corruption and many other anti socia l activities.The politicians are well aware of the acceptance of corrupt candidates of same caste by voters so they have no hesitation live a luxury life style and use innocent people and national resources for personal satisfaction.

In a country where doctors steal and sell kidney and other body parts, politicians steal files from home ministry of people suspected to be terrorist, people with fake degree become law ministerin state cabinet like Delhi, size of black money is worth Rs 30,000 crore or 20% of GDP of the 

country , a baby dies because family could not pay RS 20 bribe to government hospital staff for injection the corruption and unethical practices are considered as a necessary evil to survive in an all corrupt system.

Recommendations

The unbanked people are soft targets for chit fund companies. The unbanked people should be provided access to formal banking system. The regulatory framework for chit funds should be made stringent and security walls made robust enough so that it is difficult to lure innocent 

investors and run away with their money. The investigations should be fast forward and punishment made enough to act as a deterrent. The regulatory framework should be proactive 

rather than reactive. Tocreate awarness and alertness in investors,investing agencies should expand the mutual fund to middle level with strict rules and regulations.

Conclusion-

Awareness, Access to banking, Alertness of investors and promptness of investigating agencies can save investors from unethical practices of financial services. Expanding the mutual funds to middle class households and financial inclusion will provide better and well regulated option to 

investors and strict enforcement of regulatory provisions will reduce the incidences of unfair 

practices in financial services.