On July 15, 2024, Reserve Bank Of India issued Master Directions on Fraud Risk Management in Urban Cooperative Banks (UCBs) / State Cooperative Banks (StCBs) / Central Cooperative Banks (CCBs) superseding the earlier directions on the subject, namely, ‘Master Circular– ‘Classification and Reporting’ (DCBR.CO.BPD.MC.No.1/ 12.05.001/2015-16) dated July 1, 2015. These Directions are issued with a view to providing a framework to Cooperative Banks for prevention, early detection and timely reporting of incidents of fraud to Law Enforcement Agencies (LEAs), Reserve Bank of India (RBI) and NABARD and dissemination of information by RBI and matters connected therewith or incidental thereto.

Important points:-

1. The provisions of these Directions shall, unless otherwise provided, apply to all Primary (Urban) Cooperative Banks (UCBs) and Rural Cooperative Banks i.e. State Cooperative Banks (StCBs) and Central Cooperative Banks (CCBs) licensed or permitted to carry on banking business in India by the Reserve Bank of India.
2. Cooperative Banks shall constitute a Committee of the Board to be known as ‘Special Committee of the Board for Monitoring and Follow-up of cases of Frauds’ (SCBMF) with a minimum of three members of the Board, consisting of the Chief Executive Officer and two directors to be headed by one of the directors.
3. UCBs categorised as Tier 1 & 2 for regulatory purposes and StCBs / CCBs having deposits below ₹1000 crore, shall have the option of constituting a Committee of the Executives (CoE) with a minimum of three members, at least one of whom shall be the Chief Executive Officer for the purpose of performing the roles and responsibilities of SCBMF as required under these Directions.
4. Cooperative Banks shall set-up an appropriate organisational structure for institutionalisation of fraud risk management within their overall risk management functions / Department. A sufficiently senior official shall be responsible for monitoring and reporting of frauds.
5. Cooperative Banks shall frame a policy on engagement of external auditors.
6. Urban Cooperative Banks (UCBs) to furnish in individual fraud cases Fraud Monitoring Returns (FMRs) in FMR – I irrespective of amount involved within three weeks from occurrence of fraud.
7. Urban Cooperative Banks (UCBs) to furnish in individual fraud cases Fraud Monitoring Returns (FMRs) in FMR – III irrespective of amount involved immediately of Update Date/ Progress Date.
8. Urban Cooperative Banks (UCBs) to submit quarterly Return (RBR) in FMR – IV on theft, burglary, dacoity and robbery to RBI within 15 days from end of quarter.
9. State Cooperative Banks (StCBs)/ Central Cooperative Banks (CCBs) to submit return (RBR) on theft, burglary, dacoity and robbery to NABARD in manner and in Returns / Formats prescribed by NABARD (National Bank for Agriculture and Rural Development).

Details of the master direction is notified vide Notification No. RBI/DOS/2024-25/119 DOS.CO.FMG.SEC.No.6/23.04.001/2024-25 dated July 15, 2024 in the website www.rbi.org.in

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CS Archana Gupta