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MUMBAI: Expressing concern over increasing incidence of frauds in banks, particularly in housing and mortgage loans, the RBI today asked CEO-chaired special committees in the banks to be proactive in investigating and monitoring these irregularities.
"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," RBI said in a notification.
The RBI said the incidence of frauds in the banks has been showing an increasing trend over the recent years, both in terms of number of frauds and the amounts involved.
"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, it is a matter of concern that instances of frauds in the traditional areas of banking such as cash credit, export finance, guarantees, letters of credit remain unabated.
The apex bank said the Board for Financial Supervision (BFS) has expressed grave concern that fraudsters with the involvement of bank officials could engineer system wide break down of controls across months while putting through fraudulent transactions.
The RBI said the Board has observed that in terms of higher governance standards, the fraud risk management and fraud investigation function must be handled by the bank's CEO, its Audit Committee of the Board and the Special Committee of the Board, at least in respect of high value frauds.
The Reserve Bank of India performs supervisory function under the guidance of the 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.
At present, the special committees give routine instructions on follow up actions.
"It has been observed that the said Committees give routine instructions on follow-up actions. Essentially, the Committees' directions are not mandated to be implemented by any dedicated operating unit of the banks," RBI said. |
