What changed
RBI issued a revised master circular consolidating all current instructions on fraud monitoring for deposit-taking NBFCs, updated up to June 30, 2010. It replaces the earlier master circular No. 149 and includes detailed guidelines on fraud classification, reporting thresholds, and timelines.
What it means for you
NBFCs must now strictly adhere to the prescribed fraud reporting framework, including reporting frauds of Rs. 1 lakh and above within three weeks from detection. Delays can lead to penal action under Chapter V of the RBI Act, 1934. The circular also mandates nomination of a senior official of General Manager rank or equivalent for return submissions and quarterly board reviews.
What you must do
- Nominate an official of the rank of General Manager or equivalent to handle all fraud-related returns to RBI.
- Report frauds involving Rs. 1 lakh and above to RBI within three weeks from detection, ensuring staff accountability for delays.
- Submit quarterly returns on frauds outstanding and progress reports as per formats FMR-2 and FMR-3 for frauds of Rs. 1 lakh and above.
- Conduct quarterly and annual reviews of frauds for the board, and report frauds to police as per guidelines.
- No nil reports are required; ensure reports are duly received by Frauds Monitoring Cell or Regional Offices of Department of Non-Banking Supervision.
Who it affects
All deposit-taking NBFCs including RNBCs, NBFCs with overseas branches/offices, Senior management and compliance teams of NBFCs
What is the threshold for reporting frauds to RBI?
Frauds involving Rs. 1 lakh and above must be reported within three weeks from detection. Frauds involving Rs. 25 lakh and above are reported to the Central Office, while those below Rs. 25 lakh are reported to the Regional Office. Frauds by unscrupulous borrowers are also covered.
What happens if an NBFC delays reporting a fraud?
Delays can result in penal action under Chapter V of the RBI Act, 1934. NBFCs must fix staff accountability for such delays to avoid penalties.
Are NBFCs required to submit nil fraud reports?
No, NBFCs are not required to submit nil reports to Frauds Monitoring Cell or Regional Offices of Department of Non-Banking Supervision. However, they must ensure that any reports sent are duly received.