The Reserve Bank of India (RBI) is concerned that letter of credit (L/C) fraud remains a problem in the country's banking system.

The RBI is also worried about a wider range of frauds in the banking system and wants banks to take a greater interest in monitoring and investigating irregularities.

Proactive committees

The central bank says it has seen more and more bank fraud over recent years, both in terms of the overall number of frauds and the amounts of money involved.

It is calling on banks to be more vigilant. They should have special committees to monitor and investigate fraud in a proactive way, the RBI said in a written circular to banks.

Unabated L/C fraud

The RBI is most concerned about increased fraud in retail banking, especially in housing and mortgage loans, credit cards and internet banking.

But it is also concerned that frauds in traditional areas of banking, including L/Cs export finance and guarantees, remains "unabated."

Dedicated units

The RBI reckons most of India's banks do not currently have dedicated units looking into fraud.

It now wants banks to take the risk of fraud more seriously, with CEOs personally overseeing investigations into high-value frauds.

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