Banks request RBI to extend reporting time frame for loan related fraud

The framework mandates that banks report fraud to the RBI CRILC within a week of the joint lenders' forum (JLF) declaring an account fraudulent

BS Web Team New Delhi
Bank, money, Banks


Banks have requested the Reserve Bank of India (RBI) to relax the rules on reporting loan fraud. They told the RBI that the existing norms are too stringent, The Economic Times (ET) reported. The banks have sought a month's time for reporting loan fraud to the RBI. The current time frame for reporting loan fraud is seven days.


"The issue was discussed in a meeting last month. We have suggested to the RBI that instead of one week, the reporting time should be increased to around a month," the report said, quoting a senior bank executive aware of the development.


At present, the framework mandates that banks report fraud to the RBI's Central Repository of Information on Large Credits (CRILC) within a week of the joint lenders' forum (JLF) declaring an account fraudulent.


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After the JLF meeting, each lender has to individually get internal approvals to have the account classified as fraud. The report added that this process takes more than a week, quoting another senior bank executive. "In some cases, banks also look at other accounts with the same borrower which are operational and standard," he said.


Under the existing norms, in the case of an account with multiple lenders, a forensic audit has to be completed within three months once JLF authorises the same. 


"The banks have to decide on the account status, classifying it as fraud or not, within two weeks of the completion of the forensic audit," reported ET. In addition to that, in some instances, banks have to investigate other accounts of the borrower, which may require more time. "A 30-day period will help in accountability and effective fraud risk management," the report added.


Financial institutions, including NBFCs, are mandated to report all exposures of Rs 5 crore or more to the CRILC. The provision is in place to identify early signs of financial distress. Earlier, banks had agreed to report borrowers who did not cooperate in their forensic audit to the CRILC to facilitate early fraud detection.

First Published: Feb 21 2023 | 12:13 PM IST

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