RBI’s 3 revised master directions on fraud risk

Mumbai: Reserve Bank of India (RBI) on Monday issued three revised Master Directions on fraud risk management for banks, NBFCs and housing finance companies (HFCs). 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 (banks, NBFCs and cooperative banks). These Directions also emphasise the need for instituting robust internal audit and controls framework in banks and NBFCs, the RBI said.

These master directions have been prepared based on a comprehensive review of the earlier master directions, circular and emerging issues, the RBI added.

“The Master Directions now expressly require that banks and NBFCs shall ensure compliance with the principles of natural justice in a time-bound manner before classifying Persons/Entities as fraud, duly taking into account the Supreme Court Judgment dated March 27, 2023 (in the matter of State Bank of India & Ors. vs. Rajesh Agarwal &Ors.).