RBI updated rules on fraud risk management

Source- This post on the Updated rules of RBI on fraud risk management has been created based on the article “RBI revises rules on fraud risk management” published in “The Hindu” on 16 July 2024.

The Reserve Bank of India (RBI) has updated its rules on fraud risk management for various financial entities.

RBI Revises Fraud Risk Management Rules

a. The revised rules apply to commercial banks (including regional rural banks), All India Financial Institutions, urban, state, and central cooperative banks, non-banking finance companies (NBFCs), and housing finance companies.

b. The RBI issued three new master directions to replace the older ones. These directions are based on a thorough review of the previous rules and current issues.

c. The new rules emphasize principles and guidelines to strengthen fraud risk management and enhance the role of the Board in governance and oversight.

d. Regulated Entities (REs) must follow principles of natural justice before labeling individuals or entities as fraudulent, in line with the Supreme Court’s March 2023 judgment in the case of State Bank of India versus Rajesh Agarwal.

e. The RBI has withdrawn 36 existing circulars related to fraud risk management to simplify rules and reduce the compliance burden on financial entities.

UPSC Syllabus: Indian Economy