Every bank will now form a special committee whose job will be to keep a close eye on cases of fraud 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.
New Circular: Reserve Bank of India (RBI) has made a major change in the rules to prevent bank fraud and strengthen risk management. Under this, now if any bank account is involved in fraudulent activities, then the banks will have to mark it and take immediate action. This will help in returning the defrauded amount. The new rules will apply 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 cooperative banks, commercial banks and NBFCs. According to the circular, it has now been made mandatory to have a board-approved policy to define 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 eye on the cases of fraud 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 be tracked and the status of the same will have to be informed to the RBI. The committee will also find out where the banking system fell short due to which the fraud took place. Accordingly, the bank will be strengthened by making changes in its internal management.
Close watch 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. Along 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 accounts with red flags. Also, banks will have to give information about such accounts to RBI within seven days.
What banks have to do
1. If banks get cases of fraud of more than Rs 6 crore, then first it will have to be reported to the CBI.
2. In cases of fraud involving lesser amount than this, information has to be given to the state police.
3. Banks have to form a committee to deal with fraud cases.
4. Bank accounts linked to fraud have to be marked with a red flag.
5. Information about such accounts has to be given to RBI within seven days.
These cases will come under fraud
1. Misappropriation of funds and criminal breach of trust
2. Withdrawal of cash through forged instruments
3. Cheating a person by concealing facts
4. Forgery by creating false documents or electronic records
5. Fraudulent transactions involving foreign exchange
6. Fraudulent electronic banking/digital payment transactions
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