These 10 transactions will be reported as fraud to RBI, as per new rules
July 16, 2024
Synopsis
The RBI said in a circular dated July 16, 2024, “These master directions have been prepared based on a comprehensive review of the earlier Master Directions, circular and emerging issues. These Master Directions are principle-based and strengthen the role of the Board in overall governance and oversight of fraud risk management in the Regulated Entities (REs).”
The Reserve Bank of India (RBI) has released revised rules on the Master Directions on Fraud Risk Management in commercial banks including regional rural banks and all India financial institutions.
The RBI said in a circular dated July 16, 2024, “These master directions have been prepared based on a comprehensive review of the earlier Master Directions, circular and emerging issues. These Master Directions are principle-based and strengthen the role of the Board in overall governance and oversight of fraud risk management in the Regulated Entities (REs).”
The Reserve Bank of India issued three revised Master Directions on Fraud Risk Management for the Regulated Entities, namely for:
Commercial Banks (including Regional Rural Banks) and All India Financial Institutions;
Cooperative Banks (Urban Cooperative Banks / State Cooperative Banks / Central Cooperative Banks);
Non-Banking Finance Companies (including Housing Finance Companies).
The purpose of these directives is to encourage improved fraud risk management frameworks and systems in regional rural banks, housing finance companies, and rural cooperative banks.
Following the adjustments, the RBI dropped 36 previous circulars on the topic in an effort to simplify regulations and lessen the burden of compliance, according to the regulator.
In order to maintain uniformity and consistency when banks report fraud incidences to RBI via the web portal by filing Fraud Monitoring Returns (FMRs), they must select the most relevant category from the list below:
(i) Misappropriation of funds and criminal breach of trust;
(ii) Fraudulent encashment through forged instruments;
(iii) Manipulation of books of accounts or through fictitious accounts, and conversion of property;
(iv) Cheating by concealment of facts with the intention to deceive any person and cheating by impersonation;
(v) Forgery with the intention to commit fraud by making any false documents/electronic records;
(vi) Wilful falsification, destruction, alteration, mutilations of any book, electronic record, paper, writing, valuable security or account with intent to defraud;
(vii) Fraudulent credit facilities extended for illegal gratification;
(viii) Cash shortages on account of frauds;
(ix) Fraudulent transactions involving foreign exchange;
(x) Fraudulent electronic banking / digital payment related transactions
[The Economic Times]
