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These banks were blamed for contravention of instructions contained in Master Circular on Fraud – Classification and Reporting issued by RBI.
In the season of bank frauds, hacks and more, that has account holders worried no end, yet another report has revealed that some banks have been at the receiving end of RBI wrath. The Reserve Bank of India (RBI) today announced that it has imposed monetary policy penalty on three state-owned banks. The penalty amount was of Rs 10 million each on Union Bank of India, Bank of India and Bank of Maharashtra. These banks were blamed for contravention of instructions contained in Master Circular on Fraud – Classification and Reporting issued by RBI.
The master circulation of fraud which is developed by RBI asks bank in reporting frauds takes place on timely basis.
The circular explains that incidence of frauds, dacoities, robberies, etc., in banks is a matter of concern. While the primary responsibility for preventing frauds lies with banks themselves, the Reserve Bank of India (RBI) has been advising banks from time to time about the major fraud prone areas and the safeguards necessary for prevention of frauds.
To facilitate this ongoing process, it is essential that banks report to the Reserve Bank full information about frauds and the follow-up action taken thereon.
However, delay in reporting of frauds and the consequent delay in alerting other banks about the modus operandi and issue of caution advices against unscrupulous borrowers could result in similar frauds being perpetrated elsewhere.
The master circulation also states firmly that, banks may, therefore, strictly adhere to the timeframe fixed in this circular for reporting fraud cases to RBI failing which banks would be liable for penal action as prescribed under Section 47(A) of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies).
The recent penalty imposed on the above mentioned three state-owned banks is in exercise of powers vested in RBI under the provisions of Section 47A (1) (c) read with Section 46 (4) (i) of the Banking Regulation Act, 1949 taking into account delay on the part of the bank to detect and report fraud in an account.
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