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
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.