After crackdown on Bank of Baroda, PNB, HDFC, RBI turns on NBFC

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Mumbai | Updated: September 30, 2016 6:45:59 AM

The Reserve Bank of India on Thursday directed non-banking financial companies (NBFCs) to put in place a reporting system for recording frauds without delay and asked them to report frauds above Rs 1 lakh within three weeks of detection.

The central bank said instances of misappropriation, criminal breach of trust, fraudulent encashment, forgery, manipulation of account books, cash shortages or irregularities in foreign exchange transactions must be reported by NBFCs as well as their subsidiaries and must be followed up frequently. (Reuters)The central bank said instances of misappropriation, criminal breach of trust, fraudulent encashment, forgery, manipulation of account books, cash shortages or irregularities in foreign exchange transactions must be reported by NBFCs as well as their subsidiaries and must be followed up frequently. (Reuters)

The Reserve Bank of India on Thursday directed non-banking financial companies (NBFCs) to put in place a reporting system for recording frauds without delay and asked them to report frauds above Rs 1 lakh within three weeks of detection.

In case of frauds exceeding Rs 1 crore, NBFCs will have to file a demi-official letter to the chief general manager in charge of the department of banking supervision within a week from the date of detection, in addition to filing a report.

The central bank said instances of misappropriation, criminal breach of trust, fraudulent encashment, forgery, manipulation of account books, cash shortages or irregularities in foreign exchange transactions must be reported by NBFCs as well as their subsidiaries and must be followed up frequently.

NBFCs are required to maintain progress reports on detected frauds and conduct quarterly and annual reviews of these events and ensure their security systems are up to date and adequate to catch frauds.

Meanwhile, the regulator also expects fraud reports in cases where central investigating agencies have began criminal proceedings. Cases are permitted to be closed only after clearances from the police, court and other authorities, completion of examination of staff accountability, amount being recovered or written off, insurance claims being settled and the NBFC identifying the causes behind the fraud.

The measures from the RBI come after similar directions were given to all banks. In recent times, the central bank has cracked down on Bank of Baroda, Punjab National Bank and HDFC in connection with a foreign exchange scam last year.

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