What changed
This circular updates the previous 2004 Master Circular on fraud classification and reporting, incorporating all subsequent instructions. It reiterates the need for streamlined reporting to avoid delays and alerts banks about penal action under Section 47(A) of the Banking Regulation Act, 1949 for non-compliance.
What it means for you
Banks must tighten internal fraud detection and reporting processes to meet RBI timelines. Delays could lead to penalties and reputational risk. The circular also emphasizes fixing staff accountability for reporting lapses, ensuring senior management oversight.
What you must do
- Appoint a General Manager-level official as the single point of contact for fraud reporting to RBI.
- Streamline internal processes to report frauds to RBI without delay, adhering to prescribed timeframes.
- Ensure fraud reports include complete information and are submitted in both soft and hard copy formats as specified.
- Fix staff accountability for any delays in reporting fraud cases to RBI.
- Use the RBI's 'Frauds Reporting and Monitoring System' software for quarterly returns starting from the quarter ended June 30, 2003.
Who it affects
All commercial banks (excluding RRBs), Financial institutions, Chief executives and senior management of banks, General Managers responsible for fraud reporting
What are the seven categories of fraud under this circular?
Frauds are classified as: misappropriation and criminal breach of trust; fraudulent encashment through forged instruments or fictitious accounts; unauthorized credit for reward; negligence and cash shortages; cheating and forgery; irregularities in foreign exchange transactions; and any other type not covered above.
What happens if a bank delays reporting a fraud to RBI?
Delays can lead to penal action under Section 47(A) of the Banking Regulation Act, 1949. Banks must also fix staff accountability for such delays to prevent recurrence.
Who is responsible for submitting fraud returns to RBI?
Banks must nominate an official of the rank of General Manager who will be responsible for submitting all fraud-related returns to RBI.