Prelims level : Indian Economy - Banking Mains level : GS-III Indian Economy and Issues relating to planning, Mobilization of Resources, Growth, Development and Employment.
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Why in News?

  • The Reserve Bank of India (RBI) is in the process of putting together an exclusive wing for banking fraud oversight.

About “Fraud Oversight Wing”:

  • This wing will have teams for meta-data processing and analysis, artificial intelligence analysis units, as well as proactive risk assessment cells.
  • The banking fraud oversight wing may comprise up to 600 officers along with experts from the private sector. The RBI plans to hire industry veterans to lead the teams.
  • Experts from the private sector working in all these domains will be brought in to train the new members in the fraud oversight wing. These training sessions will be repeated every year in the initial years.
  • These new teams will also be given training in the latest technologies, so that they can also prevent another Yes Bank kind of event.

Need of such an Institution:

  • The RBI had been mulling ways to proactively detect such frauds after various Bank loan fiascos.
  1. 1.Punjab National Bank Fraud. The bank fraud was of the tune of Rs 11,450 crore involving diamond merchant Nirav Modi.
  2. 2.Yes Bank Case: Even though there were representatives of RBI on the Yes Bank board, it was found to be difficult for them to flag the risk, as they had never done a credit risk assessment task in their career so far.

Earlier Attempts of RBI:

  • The banking regulator in 2019 had moved to create a separate cadre of its own employees who would work in regulation and oversight sections.
  • However, the working conditions were very strict and anyone opting for that cadre would not be allowed to leave for three years. To overcome this problem, the RBI sought to create a fraud oversight wing.
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