The Reserve Bank of India (RBI) has issued revised rules on key directions to deal with fraud risk in commercial banks, including...

As per RBI circular dated July 16, 2024, "These key proposals have been prepared based on a comprehensive review of the earlier Master Proposals, Circular and emerging issues. These key proposals strengthen the Board's role in the overall governance and oversight of fraud risk management in principle-based and regulated entities (REs). "

The Reserve Bank of India (RBI) has issued three revised key directions on fraud risk management for the following regulated entities:

• 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 objective of these proposals is to promote better fraud risk management frameworks and mechanisms in Regional Rural Banks, Housing Finance Companies and Rural Co-operative Banks.

Following the adjustments, the RBI has abandoned its earlier 36 circulars on the issue to ease restrictions and reduce the burden of compliance.

In order to maintain uniformity and consistency while reporting instances of fraud by banks to RBI through the web portal by filing Fraud Monitoring Returns (FMR), they should select the most relevant category from the list below:

(i) Misappropriation of funds and criminal breach of trust;

(ii) Fraudulent payment by fraudulent means;

(iii) the conversion of property by way of books of account or fictitious accounts;

(iv) impersonating and deceiving any person by concealing facts with the intention of deceiving him;

(v) for the purpose of cheating by making any false documents / electronic records;

(vi) Intentional tampering, destruction, alteration, and defacement of any book, electronic record, paper, writing, valuable security, or account with intent to defraud;

(vii) Fraudulent credit facilities extended for illegal gratification;

(viii) Shortage of funds in the name of frauds;

(ix) fraudulent transactions involving foreign exchange;

(x) Fraudulent electronic banking / digital payment transactions.