Annexure II

Examples of Operational Risk losses

P&L Head PLOE 061: Operational Risk Losses due to frauds.
Description
Losses due to Fraud (Forgery, Theft, Robbery, Unauthorized
Activity involving internal party and or third party)
Sr. No. Examples of loss events
1
Unauthorized payment made / payment made against fraudulent
withdrawal
2
Loss due to operations in Dormant Account; Unauthorized transfer of
funds
3
Cash missing from safe; Cash removed by cashier; theft of cash by staff;
cash shortage.
4 Misappropriation of funds by cashier(breach of trust)
5
Loss due to dacoity, cash in transit, burglary, theft, etc.; Suspense debits
(amount written off due to robbery)
6
Fraudulent withdrawal through ATM; Fraud by staff through credit cards/
ATM cards
7
Loss due to forgery: Fraudulent withdrawal (from-SB/CD a/cs )
(a)Through forged cheque/signatures; (b)Through forged signatures on
stolen cheques, withdrawal slips; fraudulent encashment; payment of
forged cheque; payment of forged DD.
8 Financing of fictitious borrowers
9 Misappropriation of assets charged / Bank's assets
10 Breach of delegation of powers and non-ratification
11
Involvement of staff: Frauds in advance a/cs (CC, T/L, Housing
loans/Personal loans/ mortgage/ OD) through submission of fake title
deeds/ fake sales deeds/ fake documents; Non-Creation of Equitable
mortgage of the property charged to the Bank.
12
Involvement of staff: Frauds in a/cs dealing with LCs and Bank
Guarantees; Frauds through Bills Purchase/Negotiation
13
Involvement of third party: Frauds in advance a/cs (CC, T/L, Housing
loans/ Personal loans/ mortgage/ OD) - through (a)Submission of fake
title deeds, fake sales deeds, fake documents, impersonation of
guarantor/borrower/seller; (b)Connivance with valuer &property price
inflated; (c)Offering security of property already mortgaged to another
bank(multiple mortgages); (d)Selling of part or whole of mortgaged
property without prior approval from the bank; (e)Loan against pledging
of spurious ornaments; (f)Misappropriation of loan amount/ encashment
of pay order in name of the third party(builder/vendor)
14
Losses to the Bank resulting from a default of a loan where it was
determined that the loan had been obtained through fraudulent
documents.
15 Losses to the Bank resulting from unauthorized trading.
16 Hacking of Website / phishing



P&L Head PLIP034: Operational Risk Losses due to non-fraud events.
Description
Losses due to:
(a) Damage to physical assets from natural disasters/ floods/ fire/
accidents etc.
(b) Failure of hardware, software, telecommunications.
(c) Penalties, Failed transactions processing, Missed deadline or
responsibility, Non-reporting, Data entry error, TODs in accounts, Credit
cards write off.
(d) Failure to meet a professional obligation; Fiduciary breaches;
Guidelines violations; Product defects.
(e) Claim against bank by employees due to service rules or
discrimination.
Sr. No. Examples of loss events
( a )
1
Damage of Currency Notes/ records/important documents like loan
documents/ stamp papers/ stationery due to fire/flood/other
calamities/disaster etc.
2
Damages to Bank's Vehicles/ Properties due to flood, fire, earthquake
etc.
3
Repair and maintenance of Bank's own or rented premises damaged due
to fire/flood/other calamities/disaster
4
Repair and maintenance of furniture & fixture/ vehicles damaged due to
accident/fire/flood/other calamities/disaster
5
Loss on sale of Furniture & Fixture/ vehicles damages by accident/ fire/
flood/ other calamities/disaster
6
Furniture & Fixture/ Vehicles write off due to damage by accident/ fire/
flood/ other calamities/ disaster
7 Other loss due to fire/ floods/ landslides/ other calamities/ disaster
( b )
8
Losses due to failure of system/ hardware/ telecommunications;
Business Continuity Failure.
9
Losses caused by interruptions of communication lines, e.g. telephone
lines, security access network (staff cannot enter the building)
( c )
10
Penal interest charged by RBI for non-reporting / misreporting / wrong
reporting for amount withdrawn from chest
11
Penalty by RBI on non/late/wrong reporting of Statutory return DSB-I, II,
III, Form X, Form A, etc.
12 Penalty for non-payment or delay in remitting ECGC premium
13 Penal interest on delay in remitting Govt. dues collection;
14 Penalty for late submission of Tax Return i.e. Form 16, 24, ST-3, etc.
15 Penalty/interest for delay in payment of Income tax, Service tax, etc.
16 Interest compensation paid for delayed collection of RBI bonds
17
Loss due to wrong data captured: wrong entry; double credits; clearing
difference; untraceable entry
18
Compensation paid to customer as per directions of Banking
Ombudsman/ Compensation paid on account of Judgement awarded by
State Consumer forum/ Penalty imposed on bank by Enforcement
Directorate for fraud committed in NRE account by staff/ MACT-accident
claims
19 Miscellaneous losses due to missed deadline or responsibility
20 Write off due to passing of wrong vouchers
21
Failure to follow up overdue/out of order accounts: a)India Card TOD;
b)TODs in a/cs; c)wrong posting leading to TOD in the a/c; d)A/cs
overdrawn;
22 Loss due to Time Barred Documents (stale stamped docs)
23 Losses to the Bank resulting from incorrect/ incomplete client records.
24
Losses to the Bank resulting from errors in data entry through
oversight, miscalculation, or result of overwork, inability or failure to
rectify errors that have been caught but not corrected.
25 Losses as a result of failed/ late settlement of trades/ stock lending.
( d )

26
Interest paid on delayed collection of outstation instruments; cheques
lost in transit; Dividend Warrants lost in transit; Collection of cheques
pending
27 Interest Penalty for delayed tax remittance/ TDS
28
Penalty imposed by IT due to non-issuance of TDS certificates within
prescribed time limit
29 Write off of old reconciliation entries
30 Loss on account of misuse of confidential data/ sharing of password
31 Loss due to mis-selling of products (Claims by buyers of product)
32 Failure to insure assets adequately
33
Shortage/Defective/Forged notes remitted to RBI; Forged notes found
while lodgement with RBI; Recovery of forged notes by Correspondents
during lodgement.
34 Write off due to soiled notes, half value/rejection
35 Claims on account of passing of stop payment cheques
36
Double payment of remittances; interest erroneously credited over &
above the applicable rate.
37
Penalties/ fines due to wrong execution/ non-registration/ under stamping
of other legal documents
38 Access of systems to unauthorized vendor
39 Loss due to failure of vendor on outsourced services.
40 Loss due to litigation with vendor
( e )
41 Claim against the Bank by employees due to service rules
42 Law charges in labour dispute/service matter cases
43 Compensation paid in labour dispute cases