What changed
The Master Circular consolidates all fraud-related instructions issued since July 1, 2010, including clarifications provided during the year. It updates the circular as of June 30, 2011, and is now available on the RBI website.
What it means for you
Banks must ensure fraud reporting is accurate and prompt, with CEOs providing singular focus on fraud prevention and management. High-value frauds (Rs. 1.00 crore and above) require attention from the Special Committee of the Board, and delays or incomplete reporting may lead to penal action under Section 47(A) of the Banking Regulation Act, 1949.
What you must do
- Review and adopt the updated Master Circular for fraud classification and reporting.
- Ensure fraud reports are submitted to RBI without delay and with complete information.
- Establish a CEO-led fraud risk management function with oversight from the Audit Committee and Special Committee of the Board for high-value cases.
- Frame an internal fraud risk management policy with board approval, focusing on governance and accountability.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), All India Select Financial Institutions, Chief Executive Officers of these entities, Audit Committees and Special Committees of the Board
What is the threshold for reporting frauds to RBI?
Frauds involving Rs. 1.00 lakh and above must be reported to RBI. For frauds of Rs. 100.00 lakh and above, additional reporting requirements apply, including to the Special Committee of the Board.
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, and banks must frame an internal policy with board approval.
What happens if fraud reporting is delayed?
RBI expects prompt and complete reporting. Delays or incomplete information may lead to regulatory scrutiny, as RBI has observed that frauds are often detected late and reported with gaps.