What changed
RBI issued an updated master circular consolidating all current instructions on fraud monitoring for deposit-taking NBFCs, including RNBCs, as of June 30, 2009. The circular replaces the previous version (No. 121) and is now available on the RBI website.
What it means for you
NBFCs must ensure strict adherence to fraud reporting timelines to avoid penal action under the RBI Act. The circular emphasizes accountability for delays and requires nomination of a General Manager-level official for fraud returns. It also standardizes fraud classification and reporting thresholds.
What you must do
- Nominate an official of General Manager rank or equivalent to handle all fraud-related returns.
- Report frauds of Rs 1 lakh and above within three weeks of detection, with additional details for frauds of Rs 25 lakh and above sent to Central Office.
- Submit quarterly returns on frauds outstanding (FMR-2) and progress reports for frauds of Rs 1 lakh and above (FMR-3).
- Conduct quarterly and annual reviews of frauds as part of board reporting, and report cases to police as per guidelines.
- Ensure no 'nil' reports are submitted; confirm receipt of reports by RBI's Frauds Monitoring Cell or Regional Office.
Who it affects
All deposit-taking NBFCs including RNBCs, Senior management and compliance teams of NBFCs, Board of directors of NBFCs
What is the threshold for reporting frauds to RBI?
Frauds involving Rs 1 lakh and above must be reported within three weeks of detection. For frauds of Rs 25 lakh and above, reports must be sent to the Central Office with a copy to the Regional Office.
What happens if an NBFC delays reporting a fraud?
Delays can lead to penal action under Chapter V of the RBI Act, 1934, and may result in similar frauds occurring elsewhere due to lack of alerts.
Are NBFCs required to submit nil fraud reports?
No, NBFCs are not required to submit nil reports. However, they must ensure that any reports sent are received by the RBI's Frauds Monitoring Cell or Regional Office.