RBI Governor Shaktikanta Das has urged MDs and CEOs of public sector banks and some private sector banks to strengthen efforts against ‘mule accounts’.
Das held a meeting with bank chiefs in Mumbai on Wednesday (July 3, 2024) where he also discussed banks’ efforts in managing cyber fraud and the quality of unsecured loans provided both directly and through partnerships with finance companies.
What are Mule Accounts?
Mule accounts are bank accounts used in money laundering. These accounts receive funds from illegal activities and then transfer them to other destinations.
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The RBI, National Payments Corporation of India (NPCI), and the Ministry of Home Affairs are collaborating with financial institutions and tech security firms to crack down on mule accounts.
Mule accounts violate multiple regulations and can be prosecuted under the Prevention of Money Laundering Act (PMLA). Additionally, these arrangements are illegal under tax laws. According to SEBI and Reserve Bank of India (RBI) rules, such accounts are prohibited.
During the meeting, attended by RBI Deputy Governors M. Rajeshwar Rao and Swaminathan J., Das stressed the importance of banks implementing strong cybersecurity measures and managing third-party risks effectively.
They also highlighted the importance of strengthening governance standards, risk management practices, and compliance culture in banks.
Also Read: SBI, ICICI and HDFC Bank Credit Card Rules That Are Changing July 2024 Onwards
Other major issues discussed in the meeting included persistent gap between credit and deposit growth, liquidity risk management, asset-liability management (ALM), trends in unsecured retail lending, cybersecurity, third-party risks, and digital frauds, as per a RBI release.
Besides discussing regulatory issues, the RBI also discussed opportunities with banks to boost the use of the rupee in cross-border transactions and increase their involvement in the central bank’s innovation initiatives, including the central bank’s digital currency.
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