Impact of Forensic Accounting on Fraud Detection and Financial Stability: Evidence from Indian Private Sector Banks.

Gurleen Kaur
Research Scholar
M. J. P. Rohilkhand University, Bareilly, Uttar Pradesh

Dr. Anurag Agarwal
Professor
S.S. College Shahjahanpur, Uttar Pradesh

Abstract
Financial fraud presents a significant risk to banking institutions, impacting both their profitability and overall stability. This research examines how forensic accounting influences the efficiency of fraud detection and the financial health of private sector banks in India, utilizing secondary data from HDFC, ICICI, Axis, Kotak Mahindra, and IndusInd banks from 2015 to 2025. A Forensic Accounting Index (FAI) was developed based on information from published annual reports and corporate disclosures. Panel regression and mediation analyses indicate that forensic accounting markedly improves fraud detection, which in turn partially mediates its impact on financial stability. The outcomes imply that forensic accounting serves both as a governance preventative measure and a strategic contributor to financial stability. These results are significant for bank management, auditors, and regulators within the rapidly changing banking landscape of India.

Keywords: Forensic Accounting, Fraud Detection, Financial Stability, Indian Private Banks, Panel Data, RBI