Coming soon: Fraud reporting integration of NBFCs and urban co-operative banks

The central bank, in order to bring clarity, is also examining the role and scope of forensic audit along with timelines.

The Reserve Bank of India (RBI) on Friday said that steps were being taken to integrate the fraud reporting of NBFCs and urban co-operative banks (UCBs) in its central fraud registry database. The move comes after large-scale frauds were unearthed in Punjab and Maharashtra Cooperative Bank and Dewan Housing Finance Corporation (DHFL).

“The interlinking would serve as an invaluable resource in effective fraud detection and monitoring,” the central bank said in its ‘Financial Stability Report’. In addition, a greater thrust has been put on improved governance, it added. “A sharpened focus on fraud response plan is being sought from the banks and, for this, stricter timelines and clear-cut guidance with respect to reporting of frauds and declaration and processing of red flagged accounts (RFAs) will be prescribed,” it said.

Under the initiative, banks are also required to set up specialised units to make use of market intelligence and data analytics, and also put a transaction monitoring system in place. Further, to ensure effective implementation of early warning signals (EWS), banks are being provided with a list of EWS that should be mandatorily be a part of their tracking system, in addition to a list of optional EWS. The central bank, in order to bring clarity, is also examining the role and scope of forensic audit along with timelines.