RBI's 2024 Master Directions on Fraud Risk Management

What changed

The 2024 Master Directions supersede the 2016 Fraud Classification and Reporting Directions. They introduce a comprehensive governance structure for fraud risk management, including mandatory early warning signals and red-flagging of accounts. The new framework also specifies detailed reporting timelines and procedures for fraud incidents to law enforcement agencies and RBI.

What it means for you

Banks and AIFIs must overhaul their fraud risk management frameworks to align with the new directions. This includes setting up robust internal governance, early detection mechanisms, and ensuring timely and accurate fraud reporting. Non-compliance could lead to penal measures, so lenders need to update their policies and train staff accordingly.

What banks were required to do at the time

• Review and update your bank's fraud risk management policy to comply with the 2024 Master Directions.
• Implement or strengthen early warning signals and red-flagged account frameworks for early fraud detection.
• Ensure staff accountability mechanisms are in place and train employees on the new reporting requirements.
• Set up processes for timely reporting of fraud incidents to law enforcement agencies and RBI as per the new modalities.
• Conduct legal audits of title documents for large-value loan accounts as specified in the directions.

Who it affects

All commercial banks including RRBs, foreign banks, LABs, SFBs, and Payments Banks, All India Financial Institutions (AIFIs) like Exim Bank, NABARD, NaBFID, NHB, and SIDBI, Senior management and fraud risk teams in these institutions, Internal auditors and compliance officers