Fraud Risk Management: The Reserve Bank of India (RBI) has changed the rules related to fraud. In this regard, the central bank has also sent guidelines to all HFCs and NBFCs. According to these rules, any person or company must follow them before being declared a fraud.
Data Analytics Will Also Have To Be Used
RBI issued a master circular on Monday, July 15. This circular clarifies the rules related to fraud risk management. All banks, HFCs, and NBFCs must follow the new rules to strengthen internal audit and board control. Data analytics must also be used to detect fraud.
The Board Of Banks Will Have To Make A Policy
According to RBI’s master circular, a board-approved policy has now been made mandatory to determine the roles and responsibilities of the board and senior management regarding fraud risk management. RBI has issued new rules after reviewing the master circular issued earlier.
According to the latest circular, the principles of justice will be followed before declaring fraud related to a company or person. Instructions have been given to remember the Supreme Court’s decision dated March 27, 2023. This case was between the State Bank of India Rajesh Aggarwal and others.
Policy Will Have To Be Reviewed Every Three Years
The master circular states that the persons/institutions given show cause notice will be given at least 21 days to respond. RBI also said that the bank will have to issue a detailed show cause notice to those persons, entities and its promoters / full-time and executive directors against whom the allegation of fraud is being investigated. All rules should be followed before declaring fraud. The Fraud Risk Management Policy will have to be reviewed every three years.
