What changed
The Master Circular consolidates and updates all fraud-related instructions issued during the year since the previous circular dated July 1, 2011, including clarifications provided by RBI. It is updated as of June 30, 2012, and replaces the earlier circular.
What it means for you
Banks must adopt the updated reporting system for frauds, including classification thresholds (e.g., Rs. 1 lakh and above, Rs. 100 lakh and above) and quarterly returns (FMR-1 to FMR-4). The circular emphasizes fraud prevention, timely reporting, and board-level oversight, with CEOs and audit committees owning the fraud risk management function.
What you must do
- Review and implement the updated Master Circular on fraud classification and reporting.
- Ensure timely and complete reporting of frauds to RBI using prescribed formats (FMR-1 to FMR-4).
- Strengthen internal fraud risk management policies with board approval, focusing on ownership and accountability.
- Report large-value frauds (Rs. 100 lakh and above) to the Special Committee of the Board as per paragraph 5.2.4.
- Avoid delays in fraud detection and reporting; prevent RBI from learning about frauds only through press reports.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), All India Select Financial Institutions, Bank CEOs and Chairmen, Audit Committees and Special Committees of the Board, Fraud monitoring and investigation teams
What is the key update in this Master Circular compared to the previous one?
This circular consolidates all fraud-related instructions issued since July 1, 2011, including clarifications, and is updated as of June 30, 2012, replacing the earlier circular.
What are the reporting thresholds for frauds to RBI?
Frauds involving Rs. 1 lakh and above must be reported, with specific procedures for those involving Rs. 100 lakh and above, including reporting to the Special Committee of the Board.
Who is responsible for fraud risk management in banks?
The CEO, Audit Committee of the Board, and Special Committee of the Board own the fraud risk management, monitoring, and investigation function, especially for large-value frauds.