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NBFCs – RBI™s Fraud Monitoring Cell to function from Bengaluru from July 01, 2013

RBI/2012-13/532
DNBS (PD) CC.No.329 /03.10.42/2012-13

June 13, 2013

All NBFCs

Dear Sir/Madam,

RBI™s Fraud Monitoring Cell to function from Bengaluru from July 01, 2013

Attention is invited to para 3 of Master Circular DNBS.(PD)CC.No.283/03.10.042/2012-13  dated July 2, 2012 on Reporting of Frauds to RBI.

2. The Reserve Bank of India™s Fraud Monitoring Cell attached to Department of Banking Supervision (DBS), Central Office has shifted from the present location at 2nd Floor, World Trade Centre-1, Cuffe Parade, Mumbai – 400005 to Bengaluru Regional Office of the Reserve Bank. The Central Fraud monitoring Cell will continue to be part of Department of Banking Supervision, Central Office Mumbai and will start 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

3. 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.

Yours faithfully,

(C.R.Samyuktha)
Chief General Manager

*************

Para 3 

3. REPORTING OF FRAUDS TO RESERVE BANK OF INDIA

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, 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 suo moto and/or where the Reserve Bank has directed that they be reported as frauds

3.1.3 3NBFCs 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 25 lakhs 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 25 lakh, 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 25 lakhs 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.

3.2 Frauds committed by unscrupulous borrowers

3.2.1 It 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:

  1. Fraudulent discount of instruments.

  2. 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.

  3. 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.

3.2.2 4In 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. 25 lakh and above

In respect of frauds involving Rs. 25 lakh 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

Cases of attempted fraud, where the likely loss would have been Rs. 25 lakh or more, had the fraud taken place, should be reported to the Central Office of the Reserve Bank, Department of Banking Supervision, Frauds Monitoring Cell and a copy endorsed to Central Office of the Reserve Bank, Department of Non-Banking Supervision indicating the modus operandi and how the fraud was detected. Such cases should not be included in the other returns to be submitted to the Reserve Bank.

Tags: Central Fraud Monitoring CellCuffe ParadeMumbaiNBFCNon-banking financial companyReserve BankReserve Bank of India

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