Apex bank expresses concerns over banking frauds
By Joseph Samson
Sep 21, 2009
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The increasing number of frauds in banks, especially in mortgage and housing loans has raised concerns in the industry.

RBI has asked banking committees to be more proactive in investigating frauds. An RBI notification said "The banks' special committee of the board, which is chaired by the CEO (of each bank), should be responsible for the fraud investigation and monitoring function and discharge the relative oversight responsibility in a pro-active manner,"

The RBI said that the number of frauds have been increasing over the years. "It has been observed that the trend is more disquieting in retail segment, especially in housing and mortgage loans, credit card dues, Internets banking, etc," the RBI added. Moreover frauds in traditional areas like cash credit have not shown any signs of declining.

Banks have been asked to keep a record of all these frauds in order to analyse them frequently. They are also advised to initiate necessary action at their end at the earliest.

"Banks may, with the approval of their respective boards, frame internal policy for fraud risk management and fraud investigation functions, based on the governance standard relating to the ownership of the function and accountability for malfunctioning of the fraud risk management process in their banks," the RBI said.

The RBI acts as a supervisor under the guidance of board for financial supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the central bank.


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