What changed
This master circular updates the previous July 2008 circular, consolidating all instructions issued during the year and incorporating clarifications from RBI. It emphasizes strict adherence to reporting timelines, with penal action under Section 47(A) of the Banking Regulation Act for delays.
What it means for you
Banks must streamline fraud reporting to avoid penalties and prevent similar frauds elsewhere. The circular reinforces the need for senior official nomination, timely reporting, and staff accountability for delays, impacting operational compliance and risk management.
What you must do
- Nominate a senior official responsible for all fraud-related returns.
- Report frauds within prescribed timeframes based on amount thresholds (e.g., under Rs. 1 lakh, Rs. 1-25 lakh, Rs. 25 lakh and above).
- Submit quarterly returns FMR-2 and FMR-3 on outstanding and progress of frauds.
- Ensure board-level quarterly and annual reviews of fraud cases.
- Fix staff accountability for any delays in reporting frauds to RBI.
Who it affects
Primary (Urban) Co-operative Banks, Senior management and compliance officers, Board of directors, Staff handling fraud detection and reporting
What are the key fraud categories under this circular?
Frauds are classified based on the Indian Penal Code, including misappropriation, criminal breach of trust, fraudulent encashment through forged instruments, manipulation of books, unauthorized credit facilities, and negligence.
What happens if a bank delays reporting a fraud?
Delays can lead to penal action under Section 47(A) of the Banking Regulation Act, 1949, as applicable to co-operative societies, and may also result in similar frauds elsewhere due to delayed alerts.
Are there specific reporting formats to use?
Yes, banks must use formats FMR-1 for individual fraud reports, FMR-2 for quarterly outstanding, FMR-3 for quarterly progress, and FMR-4 for dacoities/robberies/thefts/burglaries.