The Reserve Bank of India (Urban Co-operative Banks – Fraud Risk Management)
Directions, 2026 issued on July 31, 2026 apply to all UCBs and establish a framework for
prevention, detection, investigation, classification, and reporting of frauds. The Directions replace earlier fraud-related guidelines and define key terms relating to fraud occurrence,
detection, and classification.
UCBs are required to implement a Board-approved Fraud Risk Management Policy,
establish fraud monitoring mechanisms, ensure natural justice before fraud classification, and
maintain systems for early detection, staff accountability, audit review, and third-party
oversight. Higher-tier UCBs must implement Early Warning Signal (EWS) frameworks for
identifying suspicious transactions.
The Directions prescribe timelines and procedures for reporting frauds to Law Enforcement
Agencies and RBI through Fraud Monitoring Returns (FMRs), along with requirements for
fraud investigation, legal audits, auditor responsibilities, and reporting of theft or robbery
incidents. Earlier guidelines are repealed while actions taken under them remain valid, with
RBI retaining interpretive authority.
