What changed
Previously, NBFCs had to report attempted fraud cases involving likely loss of ₹25 lakh or more to RBI's Fraud Monitoring Cell, Department of Banking Supervision. This circular discontinues that reporting practice effective from the date of the circular. The requirement to report such cases to the Audit Committee of the Board remains unchanged.
What it means for you
NBFCs now have reduced regulatory burden by no longer needing to file separate reports on attempted frauds to RBI's central office. However, internal governance requirements are strengthened as the Audit Committee must review each case with detailed information on modus operandi, how the attempt failed, and measures taken. Additionally, a yearly consolidated review must be submitted to RBI within three months of the end of the relative financial year, starting from the year ending March 31, 2013.
What you must do
- Stop reporting attempted fraud cases of ₹25 lakh or more to RBI's Fraud Monitoring Cell, Department of Banking Supervision.
- Continue placing each such case before the Audit Committee of the Board with details on modus operandi, how the attempt failed, and systems strengthened.
- Prepare and submit a yearly consolidated review of attempted frauds detected during the year to RBI within three months of the end of the relative financial year, starting from the year ending March 31, 2013.
- Ensure the yearly review covers area of operations, effectiveness of new processes, trend over three years, and need for further changes.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Audit Committees of NBFC Boards
Do we still need to report attempted frauds to RBI at all?
Yes, but only through the yearly consolidated review submitted within three months of the financial year-end. The individual case reporting to the Fraud Monitoring Cell is discontinued.
What details must the Audit Committee review for each attempted fraud?
The modus operandi, how the attempt did not materialize or was foiled, measures taken to strengthen systems, and new controls put in place in the area where fraud was attempted.
What is the threshold for reporting attempted frauds to the Audit Committee?
The threshold remains ₹25 lakh or more, as per the earlier Master Circular. Cases below this amount are not required to be reported under this circular.