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Fraud Monitoring Guidelines Extended to NBFCs-ND-SI (2012)

Current · Source: Reserve Bank of India · RBI/2011-12/424 · issued 02 Mar 2012 · ~2 min read

Quick answerRBI extended fraud monitoring guidelines to systemically important non-deposit taking NBFCs (NBFCs-ND-SI) with asset size of Rs.100 crore and above, effective March 2, 2012. They must report frauds to RBI and disclose fraud amounts in balance sheets, with penal action for non-compliance.

The rule, in the simplest words

If your NBFC (a company that gives loans but does not take deposits) has assets (total value of things it owns) of Rs.100 crore or more, you must follow new fraud (cheating or stealing) rules from March 2, 2012.
You must tell the RBI (India's central bank) about any fraud case: if the fraud amount is less than Rs.25 lakhs, report to your local RBI office; if Rs.25 lakhs or more, report to the main RBI office in Mumbai.
You must show the total fraud amount for the year in your balance sheet (a yearly financial report).
If you do not report frauds on time, the RBI can punish you under the RBI Act.

How it plays out — a real example

Priya, a compliance officer at a mid-sized NBFC in Pune, reviews a case where a borrower used fake gold to get a loan of Rs.10 lakhs. Since the fraud is less than Rs.25 lakhs, she reports it to the RBI's Pune regional office. She also notes the amount to include in the company's next balance sheet, ensuring her firm avoids penalties.

What changed

RBI extended existing fraud monitoring guidelines, previously applicable only to deposit-taking NBFCs, to systemically important non-deposit taking NBFCs (NBFCs-ND-SI) effective March 2, 2012. These NBFCs must now report fraud cases to RBI and disclose fraud amounts in their annual balance sheets.

What it means for you

NBFCs-ND-SI with asset size of Rs.100 crore and above now face the same fraud reporting and disclosure requirements as deposit-taking NBFCs. This increases compliance burden but enhances transparency and early detection of fraud. Non-compliance can lead to penal action under the RBI Act.

What you must do

Report individual fraud cases involving less than Rs.25 lakhs to the respective Regional Office of DNBS.
Report fraud cases of Rs.25 lakhs and above to the Frauds Monitoring Cell, Department of Banking Supervision, RBI, Mumbai.
Disclose the total fraud amount reported during the year in the company's balance sheet.
Ensure timely and accurate reporting to avoid penal action under Chapter V of the RBI Act, 1934.

Who it affects

All systemically important non-deposit taking NBFCs (NBFCs-ND-SI) with asset size of Rs.100 crore and above

❓ Common questions

Regulatory timeline

Stated effective date effective March 2, 2012
Decoded by BankPulse 2026-06-18 21:33 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the threshold for reporting fraud to the Regional Office vs. the Central Office?

Fraud cases involving less than Rs.25 lakh must be reported to the respective Regional Office of DNBS. Cases of Rs.25 lakh and above must be reported to the Frauds Monitoring Cell at RBI Central Office in Mumbai.

What happens if an NBFC fails to report a fraud?

NBFCs that fail to report fraud cases to RBI are liable for penal action under the provisions of Chapter V of the RBI Act, 1934.

Do NBFCs-ND-SI need to disclose fraud amounts in their balance sheets?

Yes, all NBFCs-ND-SI with asset size of Rs.100 crore and above, as well as deposit-taking NBFCs, must disclose the amount related to fraud reported during the year in their balance sheets.

📜 Read the original circular — full text as issued by RBI

RBI/2011-12/424

DNBS.PD.CC. No. 256 /03.10.042 / 2011-12 

 March 02, 2012

 All Non-Deposit taking NBFCs with asset size of Rs.100 crore and above and Deposit taking NBFCs 

 Dear Sirs,

 Monitoring of frauds 

 A reference is invited to DNBS(PD)CC.No.59/03.10.42/2005-06 dated October 26, 2005 which contained guidelines on classification of frauds, approach towards monitoring of and reporting system for frauds for deposit taking NBFCs.

 2. It has now been decided to extend the same Guidelines (issued in exercise of powers vested in the Bank under Section 45K and 45L of the RBI Act, 1934) to NBFCs-ND-SI also with immediate effect. Accordingly all NBFCs-ND-SI are advised to follow the Guidelines which inter alia, stipulate that individual cases of frauds involving amount less than Rs. 25 lakhs shall be reported to the respective Regional Offices(ROs) of DNBS in whose jurisdiction registered office of the company is located whereas individual cases of frauds involving amount of Rs. 25 lakhs and above may be reported to Frauds Monitoring Cell, Department of Banking Supervision, Reserve Bank of India, Central Office, World Trade Centre, Centre -1, Cuffe Parade, Mumbai- 400 005. 

 3. Additionally, all non-deposit taking NBFCs with asset size of Rs.100 crore and above and deposit taking NBFCs shall disclose the amount related to fraud, reported in the company for the year in their balance sheets. As envisaged in the CC dated October 26, 2005, it is reiterated that NBFCs failing to report fraud cases to the Reserve Bank would be liable for penal action prescribed under the provisions of Chapter V of the RBI Act, 1934.

 Yours faithfully

 ( Uma Subramanian )

 Chief General Manager In-Charge

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/424 · issued 02 Mar 2012. The plain-English explanation above is BankPulse’s own independent summary.

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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All systemically important non-deposit taking NBFCs (NBFCs-ND-SI) with asset size of Rs.100 crore and above), your first concrete step on “Fraud Monitoring Guidelines Extended to NBFCs-ND-SI (2012)” is: “Report individual fraud cases involving less than Rs.25 lakhs to the respective Regional Office of DNBS.” (RBI issued this 02 Mar 2012).

Circular: RBI/2011-12/424 -- Fraud Monitoring Guidelines Extended to NBFCs-ND-SI (2012)
Issued: 02 Mar 2012
Action required: Report individual fraud cases involving less than Rs.25 lakhs to the respective Regional Office of DNBS.
Action required: Report fraud cases of Rs.25 lakhs and above to the Frauds Monitoring Cell, Department of Banking Supervision, RBI, Mumbai.
Action required: Disclose the total fraud amount reported during the year in the company's balance sheet.
Action required: Ensure timely and accurate reporting to avoid penal action under Chapter V of the RBI Act, 1934.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________

Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7037&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.