The RBI has issued three revised Master Directions on Fraud Risk Management for the Banks and NBFCs which fall under the following 3 types of Regulated Entities (REs) as mentioned below.
1. 📌 Commercial Banks (including Regional Rural Banks) and All India Financial Institutions [PDF];
2. 📌 Cooperative Banks (Urban Cooperative Banks / State Cooperative Banks / Central Cooperative Banks) [PDF];
3. 📌 Non-Banking Finance Companies (NBFC) including Housing Finance Companies [PDF].
These Master Directions have been prepared by the RBI based on a comprehensive review of the earlier Master Directions, Circular and emerging issues. The Master Directions now expressly require that the REs shall ensure RBI compliance with the principles of natural justice in a time-bound manner before classifying Persons/Entities as fraud, duly considering the Supreme Court Judgment dated March 27, 2023 (Civil Appeal No. 7300 of 2022 in the matter of State Bank of India & Ors. Vs. Rajesh Agarwal & Ors.).
With the issuance of these RBI Master Directions, the existing 36 Circulars on the subject stand withdrawn. RBI has done with the intent of rationalising the existing instructions and reducing the compliance burden on the REs.
The framework on Early Warning Signals (EWS) and Red Flagging of Accounts (RFA) has been strengthened further for early detection and prevention of frauds in the REs and timely reporting to Law Enforcement Agencies and Supervisors. Further, requirement for Data Analytics and Market Intelligence Unit for strengthening risk management systems have been mandated.
🪀 P.S. - See the PDF in attachment or at the RBI website.
rbicompliance fraudprevention ozglaw fraudrisk ozgcompliance ozgindia riskmanagement ozgian fraudreporting
