RBI guidelines for drafting Best Practices Code for banks

Mumbai: The Reserve Bank of India (RBI) has issued guidelines for the formulation of Best Practices Code (BPC) by banks to prevent frauds. The norms have been issued to bring about a certain minimum level of uniformity with regard to the content and coverage of the code.

The BPC modelled by select banks lacked uniformity in their content and coverage and was not prepared as envisaged by the Mitra Committee (on legal aspects of bank frauds), prompting RBI to issue these norms, RBI said yesterday in a notification to banks.

As per the norms, the BPC should be a comprehensive and homogeneous document and take into account the instructions relating to the common fraud prone areas and their prevention issued to banks by RBI from time to time, the notification said.

The Code should also highlight the recommendations of the Ghosh Panel and the Mitra Committee. It should take into account relevant recommendations of Narang Committee’s study of large value frauds, Narasimham Panel on banking sector reforms and recommendations of the estimate committee on prevention of frauds in banks.

The Code should cover all the functional areas like cash, safe custody of other valuables, deposit accounts, investment portfolio, credit portfolio, foreign exchange transactions and treasury operations. The BPC may also incorporate practices that would help prevention of losses to its customers and include suitable guidance to such customers.

The BPC should be periodically revised and updated in the light of the experience gained, fresh instructions from the RBI and suggestions made by internal/external auditors. The BPC should take into account the instructions of the Central Vigilance Commission, if any, issued from time to time.