RBI/2015-16/17

DNBR (PD) [Link].058/03.10.119/2015-16 July 01, 2015

(Updated as on April 11, 2016)

To

All Deposit taking NBFCs (including RNBCs) and NBFCs-ND-SI,

Dear Sir/Madam,

Master Circular – Frauds –Future approach towards monitoring of frauds

in NBFCs

As you are aware, in order to have all current instructions on the subject at
one place, the Reserve Bank of India issues updated circulars / notifications.
The instructions related to the captioned subject contained in various circulars
issued by RBI updated as on June 30, 2015 are reproduced below. The
updated circular has also been placed on the RBI web-site
([Link]

Yours faithfully,

([Link])
Chief General Manager

गैर ब��कं ग �व�नयमन �वभाग , क�द्र�य कायार्लय, 2र� मंिज़ल , स�टर I, वल्डर् ट्रे ड स�टर, कफ परे ड, मंब
ु ई-400 005
Department of Non Banking Regulation, Central Office, 2nd Floor, Centre I, WTC, Cuffe Parade, Mumbai – 400 005
Tel No:22189131 Fax No:22163768 Email :helpdnbr@[Link]
 TABLE OF CONTENTS
Para No. Particulars
1 Introduction
2 Classification of Frauds
3 Reporting of Frauds to RBI
3.1 Frauds Involving Rs. 1 Lakh and Above
3.2 Frauds Committed by Unscrupulous Borrowers
3.3 Frauds Involving Rs. 1 crore and Above
3.4 Cases of Attempted Frauds
4 Quarterly Returns
4.1 Report on Frauds Outstanding
4.2 Progress Report on Frauds
5 Reports to the Board
5.1 Reporting of Frauds
5.2 Quarterly Review of Frauds
5.3 Annual Review of Frauds
Guidelines for Reporting Frauds to Police
FMR-1: Report on Actual or Suspected Frauds in NBFCs
FMR-2: Quarterly Report on Frauds Outstanding
FMR-3: Quarterly Progress Report on Frauds of Rs 1.00
Lakh & Above
Appendix

1
1. Introduction

1
1.1 Incidence of frauds in NBFCs is a matter of concern. While the primary
responsibility for preventing frauds lies with NBFCs themselves, a
reporting system for frauds is prescribed in the following paragraphs,
which may be adopted by NBFCs, both NBFCs-D and NBFCs-ND-SI(Non-
Deposit taking NBFCs with asset size of Rs. 500 crore and above).

1.2 It is possible that frauds are, at times, detected in NBFCs long after their
perpetration. NBFCs should, therefore, ensure that a reporting system is
in place so that frauds are reported without any delay. NBFCs should fix
staff accountability in respect of delays in reporting of fraud cases to the
Reserve Bank.

1.3 Delay in reporting of frauds and the consequent delay in alerting other
NBFCs about the modus operandi and issue of caution advices against
unscrupulous borrowers could result in similar frauds being perpetrated
elsewhere. NBFCs may, therefore, strictly adhere to the timeframe fixed
in this circular for reporting fraud cases to the Reserve Bank failing which
NBFCs would be liable for penal action as prescribed under the provisions
of Chapter V of the RBI Act, 1934.

1.4 NBFCs should specifically nominate an official of the rank of General

Manager or equivalent who will be responsible for submitting all the
returns referred to in this circular.

1.5 It may be noted that NBFCs are not required to submit ‘Nil’ reports to
Frauds Monitoring Cell/Regional Offices of Department of Non-Banking
Supervision. At the same time enough precautions may be taken by
deposit-taking NBFCs and NBFCs-ND-SI to ensure that the cases
reported by them are duly received by Frauds Monitoring Cell/Regional
Offices of Department of Non-Banking Supervision as the case may be.

1
Revised vide DNBS PD CC No 256/03.10.42/2011-12 dated March 02, 2012

2
 2
1.6 It is advised that all non-deposit taking NBFCs with asset size of Rs.500
crore and above and deposit taking NBFCs shall disclose the amount
related to fraud, reported in the company for the year in their balance
sheets. NBFCs failing to report fraud cases to the Reserve Bank would be
liable for penal action prescribed under the provisions of Chapter V of the
RBI Act, 1934.

2. Classification of Frauds

2.1 In order to have uniformity in reporting, frauds have been classified as

under based mainly on the provisions of the Indian Penal Code:

(a) Misappropriation and criminal breach of trust

(b) Fraudulent encashment through forged instruments, manipulation of
books of account or through fictitious accounts and conversion of
property
(c) Unauthorised credit facilities extended for reward or for illegal gratification.
(d) Negligence and cash shortages
(e) Cheating and forgery
(f) Irregularities in foreign exchange transactions
(g) Any other type of fraud not coming under the specific heads as above.

2.2 Cases of ‘negligence and cash shortages’ and ‘irregularities in foreign

exchange transactions’ referred to in items (d) and (f) above are to be
reported as fraud if the intention to cheat / defraud is suspected / proved.
However, the following cases where fraudulent intention is not suspected
/ proved, at the time of detection, will be treated as fraud and reported
accordingly:
(a) cases of cash shortages more than Rs.10,000/- and
(b) cases of cash shortages more than Rs. 5000/- if detected by
management /auditor / inspecting officer and not reported on the
occurrence by the persons handling cash.

2
Inserted vide [Link]. No. 256 /03.10.042 / 2011-12 dated March 02, 2012

3
 2.3 NBFCs having overseas branches/offices should report all frauds
perpetrated at such branches/offices also to the Reserve Bank as per the
format and procedure detailed under Paragraph 3 below.

3. Reporting of frauds to Reserve Bank of India

3
The Reserve Bank of India's Fraud Monitoring Cell attached to Department
of Banking Supervision (DBS), Central Office has shifted from 2nd Floor,
World Trade Centre-1, Cuffe Parade, Mumbai - 400005 to Bengaluru
Regional Office of the Reserve Bank. The Central Fraud monitoring Cell
continues to be part of Department of Banking Supervision, Central Office
Mumbai and has started functioning from the new location at Bengaluru from
July 01, 2013. All the NBFCs are requested to take note of the address of the
Central Fraud Monitoring Cell at the new location:

Central Fraud Monitoring Cell

Department of Banking Supervision,
Reserve Bank of India, 10/3/8, Nruputhunga Road,
P.B. No. 5467
Bengaluru – 560001.
Phone No: - +91 80 22244120
Fax No: +91 80 22127754

All NBFCs may file fraud reports etc. / furnish response to the existing letters
from Fraud Monitoring Cell of DBS, Central Office and fresh letters at your
end to the new address at Bengaluru from June 14, 2013 onwards.

3.1 Frauds involving Rs. 1 lakh and above

3.1.1 Fraud reports should be submitted in all cases of fraud of Rs. 1 lakh
and above perpetrated through misrepresentation, breach of trust,

3
Inserted vide DNBS(PD)[Link].329/03.10.42/2012-13 dated June 13, 2013

4
 manipulation of books of account, fraudulent encashment of FDRs
unauthorised handling of securities charged to the NBFC,
misfeasance, embezzlement, misappropriation of funds, conversion
of property, cheating, shortages, irregularities, etc.

3.1.2 Fraud reports should also be submitted in cases where central

investigating agencies have initiated criminal proceedings suomoto
and/or where the Reserve Bank has directed that they be reported
as frauds.

3.1.3 4NBFCs may also report frauds perpetrated in their subsidiaries

and affiliates/joint ventures. Such frauds should, however, not be
included in the report on outstanding frauds and the quarterly
progress reports referred to in paragraph 4 below.

3.1.4 The fraud reports in the prescribed format should be sent to the
Central Office (CO) of the Reserve Bank of India, Department of
Banking Supervision, Frauds Monitoring Cell where the amount
involved in fraud is Rs. 51 crore and above and to Regional Office
of the Reserve Bank of India, Department of Non-Banking
Supervision under whose jurisdiction the Registered Office of the
NBFC falls where the fraud amount involved in fraud is less than
Rs. 1 crore, in the format given in FMR – 1, within three weeks from
the date of detection.

A copy of FMR-1 where the amount involved in the Fraud is Rs. 1

crore and above should also be submitted to the Regional Office of
the Department of Non-Banking Supervision of Reserve Bank of
India under whose jurisdiction the Registered Office of the NBFC
falls.

6
it was observed that in some cases the eligible NBFCs were not
furnishing the FMR-1 in respect of cases involving an amount of

4
Revised vide DNBS PD CC No 127/03.10.42/2008-09 dated August 14, 2008
5
Revised vide DNBR (PD) [Link].075/03.10.001/2015-16 dated February 18,2016
6
Inserted vide [Link]. No. 314 /03.10.042 / 2012-13 dated 13.12.12

5
 Rs. 1 crore and above in individual cases of fraud to Fraud
Monitoring Cell (FrMC), DBS, CO at all and the incidence of
fraud is detected on scrutiny of FMR -II and FMR-III statements
pertaining to a quarter received at the end of the relevant
quarter. It is reiterated that all NBFCs have to necessarily
furnish FMR-1 in respect of cases involving an amount of Rs. 1
crore and above in individual cases of fraud to Fraud Monitoring
Cell (FrMC),DBS,CO within 21 days of detection of the fraud.

Further it was observed that NBFCs were also advised to

furnish case-wise quarterly progress reports on frauds involving
Rs. 1 lakh and above in the format given in FMR – 3 only to
Regional Office of the Reserve Bank of India, Department of
Non-Banking Supervision under whose jurisdiction the
Registered Office of the NBFC falls within 15 days of the end of
the quarter to which it relates. NBFCs were advised to file FMR-
3 with DBS,CO, FrMC in respect of only those fraud cases
where the amount involved in particular account is Rs. 1 crore or
above.

It was also advised that NBFCs are permitted to close the fraud
cases only where the actions are complete and prior approval is
obtained from the respective Regional Offices of DNBS. The
action would be considered complete when

(a) the fraud cases pending with CBI/Police/Court are finally disposed of;
(b) the examination of staff accountability has been completed;
(c) the amount of fraud has been recovered or written off;
(d) insurance claim wherever applicable has been settled; and
(e) the NBFC has reviewed the systems and procedures, identified as the
causative factors and plugged the lacunae and the fact of which has
been certified by the appropriate authority (Board / Audit Committee of
the Board).

6
NBFCs should also pursue vigorously with CBI for final disposal of pending
fraud cases especially where they have completed staff side action. Similarly,
NBFCs may vigorously follow up with the police authorities and / or court for
final disposal of fraud cases.

NBFCs were advised that they are allowed, for limited statistical / reporting
purposes, to close those fraud cases involving amounts upto Rs.25.00 lakh,
where:
(a) the investigation is on or challan / charge sheet not filed in the Court
for more than three years from the date of filing of First Information
Report (FIR) by the CBI / Police; or
(b) the trial in the courts, after filing of charge sheet / challan by CBI /
Police, has not started, or is in progress.

3.2. Frauds committed by unscrupulous borrowers

3.2.1It is observed that a large number of frauds are committed by

unscrupulous borrowers including companies, partnership
firms/proprietary concerns and/or their directors/partners by
various methods including the following:

(i) Fraudulent discount of instruments;

(ii) Fraudulent removal of pledged stocks/disposing of hypothecated

stocks without the NBFC’s knowledge/inflating the value of stocks
in the stock statement and drawing excess finance;

(iii) Diversion of funds outside the borrowing units, lack of interest or

criminal neglect on the part of borrowers, their partners, etc. and
also due to managerial failure leading to the unit becoming sick
and due to laxity in effective supervision over the operations in
borrowal accounts on the part of the NBFC functionaries
rendering the advance difficult of recovery;

7
 7
3.2.2. In respect of frauds in borrowal accounts, additional information
as prescribed under Part B of FMR-1 should also be furnished.

3.3. Frauds involving Rs. 1 crore and above

In respect of frauds involving Rs. 1 crore and above, in addition to

the requirements given at paragraphs 3.1 and 3.2 and above,
NBFCs may report the fraud by means of a D.O. letter addressed to
the Chief General Manager-in-charge of the Department of Banking
Supervision, Reserve Bank of India, Frauds Monitoring Cell,
Central Office and a copy endorsed to the Chief General Manager-
in-charge of the Department of Non-Banking Supervision, Reserve
Bank of India, Central Office within a week of such frauds coming to
the notice of the NBFC. The letter may contain brief particulars of
the fraud such as amount involved, nature of fraud, modus
operandi in brief, name of the branch/office, names of parties
involved (if they are proprietorship/ partnership concerns or private
limited companies, the names of proprietors, partners and
directors), names of officials involved, and whether the complaint
has been lodged with the Police. A copy of the D.O. letter should
also be endorsed to the Regional Office of Reserve Bank,
Department of Non-Banking Supervision under whose jurisdiction
the Registered Office of the NBFC is functioning.

3.4. Cases of attempted fraud

8
The practice of reporting attempted fraud cases of Rs. 25 lakh
or more to Reserve Bank of India, Fraud Monitoring Cell,
Department of Banking Supervision, Central office was
discontinued from December 13, 2012.

However, individual cases involving Rs. 25 lakh or more should

be continued to be placed before the Audit Committee of
NBFC’s Board. The report containing attempted frauds which is

7
Revised vide [Link]. No 127 /03.10.42/2008-09 dated August 14, 2008
8
Inserted vide DNBS (PD).CC. No. 315 /03.10.42 /2012-13 dated 13.12.12

8
 to be placed before the Audit committee of the Board should
cover inter alia the following viz;

• The modus operandi of the attempted fraud;

• How the attempt did not materialize in the fraud or how the
attempt failed / was foiled;

• The measures taken by the NBFC to strengthen the existing

systems and controls;

• New systems and controls put in place in the area where fraud
was attempted;

• In addition yearly consolidated review of such cases detected

during the year containing information such area of operations
where such attempts were made, effectiveness of new process and
procedures put in place during the year, trend of such cases during
the last three years, need for further change in process and
procedures, if any, etc. as on March 31 every year starting from the
year ending March 31, 2013 within three months of the end of the
relative year.

4. Quarterly Returns

4.1. Report on Frauds Outstanding

4.1.1 NBFCs should submit a copy of the Quarterly Report on

Frauds Outstanding in the format given in FMR – 2 to the
Regional Office of the Reserve Bank of India, Department of
Non-Banking Supervision under whose jurisdiction the
Registered Office of the NBFC falls irrespective of amount
within 15 days of the end of the quarter to which it relates.

4.1.2 Part – A of the report covers details of frauds outstanding as

at the end of the quarter. Parts B and C of the report give
category-wise and perpetrator-wise details of frauds reported
during the quarter respectively. The total number and

9
 amount of fraud cases reported during the quarter as shown
in Parts B and C should tally with the totals of columns 4 and
5 in Part – A of the report.

4.1.3 NBFCs should furnish a certificate, as part of the above

report, to the effect that all individual fraud cases of Rs. 1
lakh and above reported to the Reserve Bank in FMR – 1
during the quarter have also been put up to the NBFC’s
Board and have been incorporated in Part – A (columns 4
and 5) and Parts B and C of FMR – 2.

4.2. Progress Report on Frauds

4.2.1 NBFCs should furnish case-wise quarterly progress reports on

frauds involving Rs. 1 lakh and above in the format given in FMR
– 3 to the Central Office (CO) of the Reserve Bank of India,
Department of Banking Supervision, Frauds Monitoring Cell
where the amount involved in fraud is Rs. 1 crore and above and
to Regional Office of the Reserve Bank of India, Department of
Non-Banking Supervision under whose jurisdiction the
Registered Office of the NBFC falls where the fraud amount
involved in fraud is less than Rs. 1 crore within 15 days of the
end of the quarter to which it relates.

4.2.2 In the case of frauds where there are no developments during a

quarter, a list of such cases with a brief description including
name of branch and date of reporting may be furnished as per
FMR – 3.

5. Reports to the Board

5.1. Reporting of Frauds

5.1.1 NBFCs should ensure that all frauds of Rs. 1 lakh and above are
reported to their Boards promptly on their detection.

10
 5.1.2 Such reports should, among other things, take note of the failure
on the part of the concerned officials, and consider initiation of
appropriate action against the officials responsible for the fraud.

5.2. Quarterly Review of Frauds

5.2.1 Information relating to frauds for the quarters ending March, June
and September may be placed before the Board of Directors
during the month following the quarter to which it pertains.

5.2.2 These should be accompanied by supplementary material

analysing statistical information and details of each fraud so that
the Board would have adequate material to contribute effectively
in regard to the punitive or preventive aspects of frauds.

5.2.3 All the frauds involving an amount of Rs. 1 crore and above
should be monitored and reviewed by the Audit Committee of the
Board (ACB) or if ACB is not there, other Committee of the
Board of NBFCs. The periodicity of the meetings of the
Committee may be decided according to the number of cases
involved. However, the Committee should meet and review as
and when a fraud involving an amount of Rs. 1 crore and above
comes to light.

5.3 Annual Review of Frauds

5.3.1 NBFCs should conduct an annual review of the frauds and place
a note before the Board of Directors for information. The reviews
for the year-ended December may be put up to the Board before
the end of March the following year. Such reviews need not be
sent to RBI. These may be preserved for verification by the
Reserve Bank’s inspecting officers.

5.3.2 The main aspects which may be taken into account while making
such a review may include the following:

11
 (a) Whether the systems in the NBFC are adequate to detect
frauds, once they have taken place, within the shortest
possible time;

(b) Whether frauds are examined from staff angle;

(c) Whether deterrent punishment is meted out, wherever

warranted, to the persons found responsible;

(d) Whether frauds have taken place because of laxity in

following the systems and procedures and, if so, whether
effective action has been taken to ensure that the systems
and procedures are scrupulously followed by the staff
concerned;

(e) Whether frauds are reported to local Police, as the case

may be, for investigation.

5.3.3 The annual reviews should also, among other things, include the
following details:

(a) Total number of frauds detected during the year and the
amount involved as compared to the previous two years;

(b) Analysis of frauds according to different categories detailed

in Paragraph 2.1 and also the different business areas
indicated in the Quarterly Report on Frauds Outstanding
(vide FMR – 2);

(c) Modus operandi of major frauds reported during the year

along with their present position;

(d) Detailed analyses of frauds of Rs. 1 lakh and above;

(e) Estimated loss to the NBFC during the year on account of

frauds, amount recovered and provisions made;

(f) Number of cases (with amounts) where staff are involved

and the action taken against staff;

12
 (g) Time taken to detect frauds (number of cases detected
within three months, six months and one year of their
taking place);

(h) Position with regard to frauds reported to Police;

(i) Number of frauds where final action has been taken by the
NBFC and cases disposed of;

(j) Preventive/punitive steps taken by the NBFC during the

year to reduce/minimise the incidence of frauds.

6. Guidelines for Reporting Frauds to Police

NBFCs should follow the following guidelines for reporting of frauds such as
unauthorised credit facilities extended by the NBFC for illegal gratification,
negligence and cash shortages, cheating, forgery, etc. to the State Police
authorities:

(a) In dealing with cases of fraud/embezzlement, NBFCs should not

merely be actuated by the necessity of recovering expeditiously the amount
involved, but should also be motivated by public interest and the need for
ensuring that the guilty persons do not go unpunished.

(b) Therefore, as a general rule, the following cases should invariably be

referred to the State Police:

Cases of fraud involving an amount of Rs. 1 lakh and above, committed

by outsiders on their own and/or with the connivance of NBFC
staff/officers.
Cases of fraud committed by NBFC employees, when it involves NBFC
funds exceeding Rs. 10,000/-.

13
 FMR – 1
Report on Actual or Suspected Frauds in NBFCs
(Vide Paragraph 3)

Part A: Fraud Report

1. Name of the NBFC

2. Fraud number 1

1. Details of the branch 2

3.
2. (a) Name of the branch
3. (b) Branch type

(c) Place

(d) District

(e) State

4. Name of the Principal party/account 3

5.a Area of operation where the fraud has

occurred 4
4.

5.b Whether fraud has occurred in a Yes/No

borrowal account?

6.a Nature of fraud 5

6.b Whether computer is used in committing
the fraud?
6.c If yes, details thereof

7. Total amount involved 6(Rs. In lakh)

8.a Date of occurrence 7

b Date of detection 8

c Reasons for delay, if any, in detecting

the fraud
d Date on which reported to RBI 9

e Reasons for delay, if any, in reporting

the fraud to RBI

14
9.a 5. Brief history
b 6. modus operandi

10. Fraud committed by

A Staff Yes/No

B Customers Yes/No

C Outsiders Yes/No

11.a Whether the controlling office Yes/No

(Regional/Zonal) could detect the fraud by
a scrutiny of control returns, if any

b Whether there is need to improve the Yes/No

information system?

12.a Whether internal inspection/ audit Yes/No

(including concurrent audit) was
conducted at the branch (es) during the
period between the date of first
occurrence of the fraud and its detection?

b If yes, why the fraud could not have

been detected during such
inspection/audit.

C What action has been taken for non-

detection of the fraud during such
inspection/audit

13. Action taken/proposed to be taken

a Complaint with Police
i)Whether any complaint has been Yes/No
lodged with the Police?

ii) If yes, name of the Police Station.

Date of reference
Present position of the case
Date of completion of Police
investigation
Date of submission of investigation
report by Police
iii) If not reported to Police, reasons
therefore

b Recovery suit with Court/Others

15
 i) Date of filing

ii) Present position

c Insurance claim

i) Whether any claim has been lodged Yes/No

with an insurance company

ii) If not, reasons therefor

d Details of staff-side action

i) Whether any internal investigation has Yes/No

been/is proposed to be conducted

ii) If yes, date of completion

iii) Whether any departmental enquiry has
been/is proposed to be conducted
iv) If yes, give details as per format given
below:
v) If not, reasons therefor
No. Name Desgn. Whether Date of Date of Date of Date of Punish- Details of
suspen- issue of commen- comple- issue of ment prosecution/
ded/Dt. of charge cement of tion of final awarded conviction/
suspension sheet domestic inquiry orders acquittal, etc.
inquiry

e Steps taken/proposed to be taken to avoid

such incidents

14. (a) Total amount recovered

i) Amount recovered from party/parties

concerned

ii) From insurance

iii) From other sources

(b) Extent of loss to the NBFC

(c) Provision held

(d) Amount written off

15. Suggestions for consideration of RBI

16
Part B: Additional Information on Frauds in Borrowal Accounts
(a) (This part is required to be completed in respect of frauds in all borrowal accounts
involving an amount of Rs. 5 lakh and above)
Sr. No. Type of Name of party/account Party Address
party

Borrowal accounts details:

Party Name of Borrowal Nature of Date of Sanctioned Balance

Sr. party/ac account Account Sanction limit outstanding
No. count Sr. No.

Borrowal account Director/proprietor details:

Name of [Link]. Name of Address

party/account Director/Proprietor

Associate Concerns:

Name of Sr. No. Name of Associate Address

party/account Associate Concern
Concern

Associate Concern Director/proprietor details:

Name of Sr. No. Name of Director Address

Associate
Concern

(b)
(c)

17
 FMR – 2
Quarterly Report on Frauds Outstanding
(Vide Paragraph 4.1)
Name of the NBFC ______________________________________
Report for the quarter ended _____________________________ Domestic Overseas

Part – A: Frauds Outstanding

(d) (Amount in Rs. lakh)

Category Cases outstanding as New cases reported Cases closed during Cases outstanding Total Provision Amount Amount
at the end of the during the current the current quarter as at the end of the amount held for Recovere Written
previous quarter quarter quarter recovered cases d during off
outstanding the during
as at the current the
end of the Qtr. current
Qtr. quarter

No. Amount No. Amount No. Amount No. Amount Amount Amount Amount Amount
(2+4-6) (3+5-7)

1 2 3 4 5 6 7 8 9 10 11 12 13

18
 Category Cases outstanding as New cases reported Cases closed during Cases outstanding Total Provision Amount Amount
at the end of the during the current the current quarter as at the end of the amount held for Recovere Written
previous quarter quarter quarter recovered cases d during off
outstanding the during
as at the current the
end of the Qtr. current
Qtr. quarter

No. Amount No. Amount No. Amount No. Amount Amount Amount Amount Amount
(2+4-6) (3+5-7)

1 2 3 4 5 6 7 8 9 10 11 12 13

Cash
Deposits
(i) Recurring
(ii) Daily
(iii) Term
(iv) Others

Non-resident account
Advances
(i) Cash credit
(ii) Term Loans
(iii) Bills
(iv) Others
7. Inter-branch
accounts

19
 Category Cases outstanding as New cases reported Cases closed during Cases outstanding Total Provision Amount Amount
at the end of the during the current the current quarter as at the end of the amount held for Recovere Written
previous quarter quarter quarter recovered cases d during off
outstanding the during
as at the current the
end of the Qtr. current
Qtr. quarter

No. Amount No. Amount No. Amount No. Amount Amount Amount Amount Amount
(2+4-6) (3+5-7)

1 2 3 4 5 6 7 8 9 10 11 12 13

Off-balance sheet
(i) Letters of
credit
(ii) Guarantees
(iii) Co-
acceptance
(iv) Others
Others
Total
e. Note: For Indian NBFCs with overseas offices/branches, the above figures relate to the domestic position. The figures in respect of overseas
branches/offices may be shown in a separate sheet in the same format as above.

20
 Part – B: Category-wise classification of frauds reported during the quarter ______________

Name of the NBFC ______________________________________

Misappropriation Fraudulent Unauthorised Negligence and Cheating and Irregularities in Others Total
and criminal encashment/ credit facility cash shortages forgery foreign
breach of trust manipulation of extended for exchange
Category books of account illegal transactions
and conversion of gratification
property
No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt.

Less than Rs. 1 lakh

Rs. 1 lakh and above but

less than Rs. 1 crore

Rs. 1 crore and above

Total

21
 (e) Part – C: Perpetrator-wise classification of frauds reported during the quarter______________
(f)
(g) Name of the NBFC ______________________________________
(h)
Staff Customers Outsiders Staff and Staff and Customers Staff, Customers Total
Customers Outsiders and Outsiders and Outsiders
Category
No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt. No. Amt.

Less than Rs. 1 lakh

Rs. 1 lakh and above but

less than Rs. 1 crore

Rs. 1 crore and above

Total

Note: [Link] above category-wise classification is mostly based on various provisions of the Indian Penal Code.
2. All amounts may be furnished in Rs. lakh up to two decimals.

Certificate

Certified that all frauds of Rs. 1 lakh and above reported to the Reserve Bank during the last quarter have also been reported to the NBFC’s Board
and have been incorporated in Part A (Columns 4 and 5) and Parts B and C above.

Signature:
Name and Designation:

Place:
Date:

22
 FMR – 3
Quarterly Progress Report on Frauds of Rs. 1.00 lakh & above
(Vide Paragraph 4.2)

Name of the NBFC: ________________________________

Statement for quarter ended _______________________

Part A: Summary information

Number Amount involved
(Rs. In lakh)
1. Cases outstanding
2. Cases where there is no
progress (furnish case-wise
details as per format at Part
B below)
3. Cases where there is
progress (furnish case-wise
details as per format at Part
C below)

Part – B: Details of cases where there is no progress

No. Name of branch Fraud No. Name of party/account Amount

(Rs. in lakh)

गैर ब��कं ग �व�नयमन �वभाग , क�द्र�य कायार्लय, 2र� मंिज़ल , स�टर I, वल्डर् ट्रे ड स�टर, कफ परे ड, मंब
ु ई-400 005
Department of Non-Banking Regulation, Central Office, 2nd Floor, Centre I, WTC, Cuffe Parade, Mumbai – 400 005
Tel No: 22189131 Fax No: 22163768 Email: helpdnbr@[Link]
Part – C: Case-wise details of progress

Name of party/account: ____________________________________

Name of branch/office: ____________________________________
Amount involved
(Rs. in lakh) ______________________________

Fraud No : ______________________________

1. Date of first reporting

2.a Date of filing recovery suit with

DRT/Others

b Present position

3. Recoveries made up to the end of the

last quarter (Rs. in lakh)

4. Recoveries made during the quarter

(Rs. In lakh)

a) From party/parties concerned

b) From insurance

c) From other sources

5. Total recoveries (3+4) (Rs. in lakh)

6. Loss to the NBFC (Rs in lakh)

7. Provision held (Rs in lakh)

8. Amount written off (Rs in lakh)

9. a) Date of reporting case to Police

b) Date of completion of Police

investigation

c) Date of submission of investigation

report by Police

24
10. Details of staff-side action
No. Name Desgn. Whether Date of Date of Date of Date of Punish- Details of
suspen- issue of commen- comple- issue of ment prosecution
ded/Dt. charge cement of tion of final awarde- /conviction/
of sheet domestic inquiry orders d acquittal,
suspens inquiry etc.
-ion
1.
2.
3.
4.

11. Other developments

12. Whether case closed during the Yes/No

quarter
13. Date of closure:

25
Instructions for compiling the Fraud Report (FMR 1):
1
Fraud number: This has been introduced with a view to facilitate computerisation and cross-
reference. The number will be an alphanumeric field consisting of the following: four alphabets (to
indicate name of NBFC), two digits for the year (02, 03, etc.), two digits for the quarter (01 for January
– March quarter, etc.) and the final four digits being a distinctive running number for the fraud reported
during the quarter.
2
Name of the branch: In case the fraud relates to more than one branch, indicate the name of only
one branch where the amount involved has been the highest and/or which is mainly involved in
following up the fraud. The names of the other branches may be given in the brief history/modus
operandi against item number 9.
3
Name of party: A distinctive name may be given to identify the fraud. In the case of frauds in borrowal
accounts, name of the borrowers may be given. In the case of frauds committed by employees, the
name(s) of the employee(s) could be used to identify the fraud. Where fraud has taken place, say,
inter-branch account, and if it is not immediately possible to identify the involvement of any particular
employee in the fraud, the same may be identified merely as “Fraud in inter-branch account”.
4
Area of operation where the fraud has occurred: Indicate the relevant area out of those given in
column 1 of statement FMR 2 (Part A) (Cash; Deposits (Term); Non-resident accounts; Advances
(Cash Credit/Term Loans/Bills/Others); Foreign exchange transactions; Inter-branch accounts;
Cheques/demand drafts, etc.; accounts; Off-balance sheet (Letters of credit/Guarantee/Co-
acceptance/Others); Others)
5
Nature of fraud: Select the number of the relevant category from the following which would best
describe the nature of fraud: (1) Misappropriation and criminal breach of trust,
(2) Fraudulent encashment through forged instruments/manipulation of books of account or through
fictitious accounts and conversion of property, (3) Unauthorised credit facilities extended for reward or
for illegal gratification, (4) Negligence and cash shortages,
(5) Cheating and forgery, (6) Irregularities in foreign exchange transactions, (7) Others.
6
Total amount involved: Amounts should, at all places, be indicated in Rs. lakh up to two decimal
places.
7
Date of occurrence: In case it is difficult to indicate the exact date of occurrence of fraud (for
instance, if pilferages have taken place over a period of time, or if the precise date of a borrower’s
specific action, subsequently deemed to be fraudulent, is not ascertainable), a notional date may be
indicated which is the earliest likely date on which the person is likely to have committed the fraud
(say, January 1, 2002, for a fraud which may have been committed anytime during the year 2002).
The specific details, such as the period over which the fraud has occurred, may be given in the
history/modus operandi.
8
Date of detection: If a precise date is not available (as in the case of a fraud detected during the
course of an inspection/audit or in the case of a fraud being reported such on the directions of the
Reserve Bank), a notional date on which the same may be said to have been recognised as fraud
may be indicated.
9
Date of reporting to RBI: The date of reporting shall uniformly be the date of sending the detailed
fraud report in form FMR 1 to the RBI and not any date of fax or DO letter that may have preceded it.

26
 Appendix

Sr No. Circular No Date

1. DNBS PD CC No 127/03.10.42/2008-09 August 14, 2008

2. DNBS PD CC No 256/03.10.42/2011-12 March 02, 2012

3. [Link].256/03.10.042/2011-12 March 02, 2012

4. [Link].314/03.10.042/2012-13 December 13, 2012

5. DNBS (PD).[Link].315/03.10.42/2012-13 December 13, 2012

6. DNBS(PD)[Link].329/03.10.42/2012-13 June 13, 2013

7. DNBR (PD) [Link].075/03.10.001/2015-16 February 18, 2016

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