RBI fines UCO Bank over fraud reporting

The Reserve Bank of India has fined the UCO Bank for discrepancies in complying with the central bank’s norms on classifying and reporting frauds and on collection of account payee instruments, the bank said.

“..the Reserve Bank of India..under the Banking Regulation Act, 1949 imposed a penalty of Rs 2.00 crore for non-compliance of instructions issued by the Reserve Bank of India on collection of account payee instruments and those on “Frauds – Classification and Reporting”, UCO Bank said in an investor update.

The bank did not give further details.

Account payee instrument are instruments like checks and demand drafts that cannot be collected by anyone other than the person whose name is written on the paper.

These instruments are supposed to offer security to the payee and the payer that the money will end up with the intended person and will not be claimed by someone else.

Banks are supposed to take adequate precautions when dealing with account-payee instruments to verify the identity of the person to whom the payment is being routed.

RBI guidelines prohibit banks from crediting the proceeds of a check to the account of any person other than the payee mentioned in the check itself.

The RBI has, in recent years, issued stricter instructions with regard to disclosure of non-performing assets, fraud transactions and other operating criteria.