Banks should step up efforts against ‘mule accounts’: RBI to bank chiefs
Banks should step up efforts against ‘mule accounts’, which are used to launder the proceeds of fraud schemes, Reserve Bank of India Governor Shaktikanta Das told chiefs of banks on Wednesday.
In a meeting with the MDs and CEOs of Public and Private Sector banks, Das also asked them to intensify customer awareness and education initiatives, among other measures, to curb digital frauds.
RBI has already issued instructions, which banks are required to strictly follow for opening accounts and monitoring transactions.
The aforementioned instructions are with a view to minimise the operations of “Money Mules” which are used to launder the proceeds of fraud schemes (for example, phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties which act as “money mules.”
Fraudsters, sometimes, can use idle accounts for receiving and transferring large funds without the knowledge of account holders.
The Governor emphasised the need for banks to ensure robust cybersecurity controls and effectively manage third-party risks.
Credit and deposit growth
The issue of persisting gap between credit and deposit growth was discussed at the meeting. This is underscored by the fact that credit growth (at 18.85 per cent year-on-year) of all scheduled banks’ as on June 14, 2024, outstripped deposit growth (at 12.37 per cent).
In his June 2024 monetary policy statement, Das observed that the persisting gap between credit and deposit growth rates warrants a rethink by the boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained.
In the latest financial stability report (FSR), RBI noted that despite the divergence in credit and deposit growth, elevated credit-deposit ratio and narrowing credit-GDP gap, credit growth at 16.1 per cent as on May 31, 2024 (net of merger of an HFC with a bank) remains sustainable and within the range of 16-18 per cent.
Caution
However, the central bank cautioned that credit growth beyond 18 per cent may lead to higher impairments.
The meeting also discussed the trends in unsecured retail lending in the backdrop of RBI increasing risk weights on unsecured consumer credit and bank credit to NBFCs on November 16, 2023 to pre-empt build up of any potential risk in these segments.
Recent data suggest that there is some moderation in these loans and advances, Das had noted in his last monetary policy statement.
While acknowledging the higher resilience and strength of the banking sector, the Governor impressed upon the bankers the importance of further strengthening the governance standards, risk management practices and compliance culture in banks.
The other issues that were discussed at the meeting include liquidity risk management and ALM (asset-liability management); credit flows to MSMEs; increasing the usage of Indian Rupee for cross-border transactions; and banks’ participation in innovation initiatives of RBI.