In a recent move to strengthen the banking sector’s defenses against fraud, Reserve Bank of India (RBI) Governor Shaktikanta Das convened meetings with the managing directors (MDs) and chief executive officers (CEOs) of public sector banks and select private sector banks in Mumbai on July 3. Governor Das emphasized the urgent need to address the issue of ‘mule accounts’ and called for enhanced customer awareness and educational initiatives to curb digital fraud.
Mule accounts, which are opened by one individual but operated by another, are often exploited for money laundering and tax evasion. These accounts violate multiple regulations and are prosecutable under the Prevention of Money Laundering Act (PMLA). The practice is also illegal under tax laws and contravenes the rules set by the Securities and Exchange Board of India (Sebi) and the RBI.
During the meeting, Governor Das highlighted the necessity for banks to implement robust cybersecurity controls and effectively manage third-party risks. The discussions also covered a broad range of topics including the persistent gap between credit and deposit growth, liquidity risk management, asset-liability management (ALM) issues, trends in unsecured retail lending, and measures to prevent digital fraud.
The RBI’s release noted that the meeting also focused on the strengthening of assurance functions, credit flows to micro, small, and medium enterprises (MSMEs), the increased use of the Indian Rupee for cross-border transactions, and banks’ participation in the RBI’s innovation initiatives. Governor Das underscored the importance of further enhancing governance standards, risk management practices, and compliance culture within banks.
