What changed
This Master Circular updates and consolidates current instructions on fraud monitoring for NBFCs as of June 30, 2013. It updates the earlier Master Circular No. 283 and brings together reporting timelines, classification norms, and disclosure requirements in one place.
What it means for you
NBFCs must tighten internal fraud detection and reporting systems to avoid penalties. The circular emphasizes zero tolerance for delays, as late reporting can enable similar frauds elsewhere. It also requires fraud amounts to be disclosed in balance sheets, increasing transparency and accountability.
What you must do
- Nominate a General Manager or equivalent as the single point of contact for all fraud-related returns to RBI.
- Ensure frauds involving ₹1 lakh and above are reported to RBI within the prescribed timeframe without delay.
- Submit quarterly returns (FMR-2 and FMR-3) on frauds outstanding and progress to the Frauds Monitoring Cell.
- Disclose the total fraud amount for the year in the balance sheet for deposit-taking NBFCs and NBFCs-ND-SI.
- Conduct quarterly and annual board reviews of fraud cases to assess systemic weaknesses.
Who it affects
All deposit-taking NBFCs (including RNBCs), Non-deposit-taking NBFCs with asset size of ₹100 crore and above (NBFC-ND-SI)
What is the threshold for reporting frauds to RBI?
Frauds involving ₹1 lakh and above must be reported. Frauds of ₹25 lakh and above are also mentioned for reporting.
What are the consequences of delayed fraud reporting?
Delays in reporting can lead to staff accountability being fixed. Failure to report fraud cases can lead to penal action under Chapter V of the RBI Act, 1934.