What changed
RBI observed that borrowers defrauding one bank continued enjoying credit from other banks under multiple banking arrangements, sometimes using the same securities. The circular reinforces existing information-sharing rules from September 2008, now requiring multilateral exchange of fraud incidents, legal actions, and borrower activities post-fraud.
What it means for you
Banks must now proactively share fraud-related information across all lenders in a multiple banking setup to prevent borrowers from exploiting information gaps. This reduces the risk of undetected frauds and ensures coordinated recovery and legal action, potentially lowering credit losses.
What you must do
- Immediately share fraud details with all other banks in the multiple banking arrangement upon detection.
- Establish a coordinated strategy for legal, criminal, and recovery actions, led by the detecting bank or the one with highest exposure.
- Exchange information on modus operandi, securities pledged, and borrower activities to ensure consistency in fraud reporting to RBI.
- Review and strengthen existing information-sharing mechanisms as per DBOD circular of September 2008.
Who it affects
All scheduled commercial banks (excluding RRBs), Banks with multiple banking arrangement exposures, Credit risk and fraud monitoring teams
What triggers the need to share fraud details with other banks?
Detection of a fraud in a borrowal account under multiple banking arrangement triggers immediate sharing of details with all other financing banks to prevent the borrower from defrauding them.
Who should lead the coordinated action among banks?
The bank that detects the fraud first or the bank with the maximum exposure should drive the coordination for legal, criminal, and recovery actions.
Does this circular replace the September 2008 DBOD circular?
No, it reinforces and supplements it by mandating multilateral exchange of fraud-related information as part of ongoing compliance.