RBI revises rules on fraud risk management

• The Reserve Bank of India (RBI) on Monday issued three revised master directions on fraud risk management for Regulated Entities such as
• commercial banks including regional rural banks and
• All India Financial Institutions; urban, state and central cooperative banks; and
• non-banking finance firms and housing finance companies.
• 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).

Mandatory compliance

• The directions mandate REs to comply with principles of natural justice in a time-bound manner before classifying persons/entities as fraud, taking into account the Supreme Court judgment on State Bank of India versus Rajesh Agarwal.
• The RBI withdrew 36 existing circulars on the subject following these revisions, to rationalise rules and to reduce compliance burden.

Prelims Takeaway:

• MPC
• RBI