The Reserve Bank of India vide its notification dated 18.04.2016 reviewed an earlier notification DBR.No.BP. BC.83/21.04.048/2014-2015 dated 01.04.2015 and issued amended provisioning norms with respect to accounts declared as Fraud Accounts to all scheduled commercial banks except the regional rural banks.

The detailed guidelines for provisions pertaining to Fraud Accounts are as under:-

  1. The amount due to the banks or for which the bank is liable (including the case of deposit accounts) should be provided immediately after the fraud is detected and any financial collateral adjustments with regard to basel iii capital regulations shall be adjusted with regard to the fraud accounts.
  2. The banks are now given an option to make such aforementioned provisions over a period of four quarters commencing from the quarter in which the fraud was detected.
  3. If the banks take more than one financial year while providing for the full provisioning being made, they should debit "other reserves" by credit to provisions by the amount still not provided at the end of financial year. The provisioning should be completed in the subsequent quarters of the next financial year by debiting the profit and loss account, after reversing the debits to "other reserves". The "other reserves" mentioned above are other than the reserves that are made under section 17(2) of banking regulation act, 1949.
  4. The banks shall also make disclosures about the number of fraud accounts, amount involved, provisions made during the year and unamortised provisions debited to "other reserves" at the end of the year.
  5. The banks should adhere to the guidelines issued on classification and reporting of frauds contained in the circular no. Dbs.Co.Cfmc. Bc.No.1/23.04.001/2014-2015 Dated 1st july, 2014 pertaining to "Frauds – classification and reporting".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.