RBI has made major changes in the rules to prevent bank fraud.
The Reserve Bank of India (RBI) has made major changes in the rules to prevent bank fraud and strengthen risk management. Under this, now if any bank account is involved in fraudulent activities, then banks will have to identify it and take immediate action. This will help in returning the defrauded amount. The new rules will be applicable to all types of banks, non-banking financial companies and other financial institutions.
RBI has recently issued a new circular containing key guidelines in this regard. It aims to strengthen the fraud risk management framework in regional rural banks, housing finance companies, rural co-operative banks, commercial banks and NBFCs. According to the circular, it has now been made mandatory to require a board-approved policy to set out the roles and responsibilities of the board and senior management when it comes to fraud risk management.
Banks will have to form a committee
According to the circular, every bank will now form a special committee, whose job will be to keep a close watch on the cases of fraud taking place in the bank. Every bank will create such a strong system in which immediate action will have to be taken on every complaint of fraud. They will have to track it and inform its status to RBI. The committee will also find out where there were shortcomings in the banking system, due to which the fraud took place. Accordingly, changes will be made in the internal management of the bank and it will be strengthened.
Keep a close eye on suspicious accounts
If any account in the bank is associated with any fraudulent activity then the bank system will issue an early warning and that account will be red flagged. This will make it easier for banks to monitor and identify accounts involved in fraud or without KYC. With this, the use of such accounts will be banned. RBI has also said that banks will not be able to issue any kind of loan on red flagged accounts. Also, banks will have to give information about such accounts to RBI within seven days.
What will banks have to do?
1. If banks come across fraud cases of more than Rs 6 crore, then first they will have to inform CBI.
2. In cases of fraud involving less than this amount, information will have to be given to the state police.
3. Banks will have to constitute a committee to deal with fraud cases.
4. Bank accounts linked to fraud will have to be red flagged.
5. Information about such accounts will have to be given to RBI within seven days.
These cases will amount to fraud
1. Misappropriation of funds and criminal breach of trust
2. Withdrawal of cash through counterfeit instruments
3. Cheating a person by hiding facts
4. Fraud committed by creating false documents or electronic records
5. Fraudulent transactions involving foreign exchange
6. Fraudulent electronic banking/digital payment transactions
