RBI Consolidates And Notifies RBI (Commercial Banks – Fraud Risk Management) Directions, 2026

The Reserve Bank of India (“RBI”) by notification dated 31.07.2026 notified the RBI (Commercial Banks – Fraud Risk Management) Directions, 2026¹ (“Fraud Master Directions 2026”) consolidating, repealing and superseding the RBI (Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions) Directions, 2024 and other circulars (“Fraud Master Directions 2024”).

The salient changes brought in by the Fraud Master Directions 2026 are as follows:

1. Applicability: The Fraud Master Directions 2026 shall apply only to Commercial Banks, corresponding new banks and State Bank of India and excludes Local Area Banks (“LABs”), Payments Banks (“PBs”), Regional Rural Banks (“RRBs”) and All India Financial Institutions (“AIFI”) from their scope. RBI has, in parallel, issued separate directions for NBFCs, AIFIs, RRBs and other regulated entities, thereby segmenting the fraud risk management regime across categories of regulated entities.
2. Natural Justice Safeguards: An explanation has been inserted stating that the requirement of complying with the principles of natural justice applies to all Persons/Entities and their Promoters/Whole-Time and Executive Directors classified as fraud by the bank, i.e., in all cases of fraud classification which may have civil consequences (penal measures, caution listing).
3. Threshold for placing fraud cases before SCBMF: The Fraud Master Directions 2026 requires the board of the Banks to decide the threshold amount of fraud cases to be placed before the Special Committee of the Board for Monitoring and Follow-up of cases of Frauds (“SCBMF”), after duly taking into account the scale and complexity of the bank’s operations.
4. Reporting of Fraud to Law Enforcement Agencies (“LEA”): The Fraud Master Directions 2026 specifically provide that, having regard to Section 33 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), banks are advised to mandatorily report incidents of fraud involving INR 1 lakh or more to LEA, even though BNSS does not mandate reporting of all offences.
5. Fraud Monitoring Returns (“FMR”): While the Fraud Master Directions 2026 continue to provide for the use of the online FMR portal and the FMR Update Application (“FUA”), they have specifically removed the requirement (as was provided under the Fraud Master Directions 2024) to file separate monthly certificates and flash reports, thereby consolidating fraud reporting through the FMR/CFR mechanism.
6. Withdrawal of FMR / removal of names pursuant to Court directions: A new provision has been inserted stating that where withdrawal of an FMR or removal of the name(s) of perpetrator(s) is necessitated due to Court directions, the bank may arrange to withdraw the FMR / remove the name(s) immediately, and such cases shall subsequently be placed before an official in the rank of whole-time Director for information.
7. The Fraud Master Directions 2026 further introduce: (i) a savings clause preserving actions, rights, obligations, liabilities, penalties and proceedings under the repealed Fraud Master Directions 2024; (ii) an express clarification that the Fraud Master Directions 2026 are in addition to, and not in derogation of, other applicable laws; and (iii) an interpretation provision empowering RBI to issue clarifications and providing that RBI’s interpretation of the Fraud Master Directions 2026 shall be final and binding.

The Fraud Master Directions 2026 have come into force from the date of issuance, i.e., 31.07.2026.

Footnote

1. RBI (Commercial Banks – Fraud Risk Management) Directions, 2026

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