RBI tightens provisioning norms for bank frauds

Tightening disclosure norms, RBI has asked banks to disclose fraud cases and make provisions for them not exceeding four quarters from the date during which it has been detected.
Banks, RBI in a notification said, must scrupulously adhere to the extant guidelines on classification and reporting of frauds.

On a review, it has been decided to amend the provisioning norms in respect of all cases of fraud, it said.

Banks should normally provide for the entire amount due to the bank or for which the bank is liable (including in case of deposit accounts), immediately upon a fraud being detected, it said.
While computing the provisioning requirement, banks may adjust financial collateral eligible under Basel III Capital regulations available with them with regard to the accounts declared as fraud account, it said.

"However, to smoothen the effect of such provisioning on quarterly profit and loss, banks have the option to make the provisions over a period, not exceeding four quarters, commencing from the quarter in which the fraud has been detected," it said.

As many as 861 bank advance related fraud cases of Rs 1 lakh and more, involving Rs 4,920 crore, were reported in the first half of 2015-16. During 2014-15, 1,651 such cases were reported that involved an amount of Rs 11,083.11 crore.

Banks shall make suitable disclosures with regard to number of frauds reported, amount involved in such frauds, quantum of provision made during the year and quantum of unamortised provision debited from 'other reserves' as at the end of the year, it said.