What changed
This Master Circular updates the previous July 2009 circular, consolidating all instructions issued during the year. It incorporates clarifications provided by RBI to banks and is updated as of June 30, 2010.
What it means for you
Banks must ensure fraud reporting is prompt and complete, with CEO-level focus on fraud prevention and management. High-value frauds (₹1 crore and above) require reporting to the Special Committee of the Board. Delayed or incomplete reporting will attract regulatory scrutiny.
What you must do
- Review and update internal fraud risk management policies with board approval.
- Ensure all frauds involving ₹1 lakh and above are reported to RBI without delay.
- Submit quarterly returns FMR-2, FMR-3, and FMR-4 as prescribed, and FMR-1 in both hard and soft copies.
- Report frauds involving ₹1 crore and above to the Special Committee of the Board.
- Conduct quarterly and annual reviews of frauds and report findings to the board.
Who it affects
All scheduled commercial banks (excluding RRBs), All India select financial institutions, Chief Executive Officers and board members, Fraud monitoring and investigation teams
What is the threshold for reporting frauds to RBI?
Frauds involving ₹1 lakh and above must be reported to RBI. Frauds involving ₹100 lakh and above have additional reporting requirements.
Who is responsible for fraud risk management in banks?
The CEO must own the fraud prevention and management function. The Audit Committee and Special Committee of the Board oversee high-value frauds.
What happens if fraud reporting is delayed?
RBI expects prompt and accurate reporting. Delays or incomplete information may lead to regulatory action, as RBI may learn of large frauds through press reports.