Have you ever wondered how banks report fraud cases in India and when the Central Bureau of Investigation (CBI) becomes involved? In this article, we will have a look at how public and private sector banks report frauds and CBI handles Bank fraud cases above what limit.
Banks Must Report Fraud Cases Immediately
According to RBI guidelines, banks are required to immediately report incidents of fraud to the appropriate Law Enforcement Agency (LEA), subject to applicable laws.
However, every bank fraud case is not directly reported to the CBI. Smaller fraud cases may be reported to the State or Union Territory Police, while larger fraud cases involving public sector banks are reported to the CBI.
How Much Bank Fraud Is Reported to CBI? What is the limit?
For Public Sector Banks (PSBs) and Regional Rural Banks (RRBs), the amount involved in the fraud decides whether the case is reported to the police or the CBI.
If the fraud amount is below ₹6 crore, the bank should lodge a complaint with the State or Union Territory Police. If the fraud amount is ₹6 crore or more, the complaint should be lodged with the Central Bureau of Investigation (CBI).
In simple words, a fraud of ₹6 crore and above involving a public sector bank or regional rural bank falls under the CBI reporting framework prescribed by the RBI.
What About Private Sector and Foreign Banks?
The rules are different for private sector banks and foreign banks. If the fraud amount is below ₹1 crore, the bank must report the case to the State or Union Territory Police.
For fraud cases involving ₹1 crore or more, the complaint is reported to the State or UT Police. In addition, details of the fraud are required to be reported to the Serious Fraud Investigation Office (SFIO) under the Ministry of Corporate Affairs. The fraud details are submitted to the SFIO through the Fraud Monitoring Return (FMR) format.
Why Is the CBI Limit ₹6 Crore?
The ₹6 crore limit was not always the same. In 2004, public sector banks were advised to report fraud cases involving ₹1 crore and above to the CBI. In 2012, the limit was increased to ₹3 crore and above.
Later, RBI considered the impact of inflation. The inflation-indexed value of ₹3 crore had increased to around ₹5.6 crore by 2022-23. Therefore, the reporting threshold was increased to ₹6 crore. This means the current ₹6 crore limit was fixed after considering the increase in the value of money over time.
The fraud reporting framework was prescribed after consultation with the Central Vigilance Commission (CVC), the Department of Financial Services (DFS), Government of India, and selected law enforcement agencies.
How Are Fraud Cases Reported When Many Banks Give the Same Loan?
Sometimes, several banks jointly provide a large loan to one company or borrower. This is known as consortium lending. If separate offences have been committed against different banks and these offences are not part of the same fraudulent transaction, each bank may file a separate complaint with the law enforcement agency.
However, if the fraud is part of the same transaction, only one consortium member may lodge the complaint. Other banks can support the investigation by providing documents, information and other necessary records to the investigating agency.
Banks can decide the appropriate course of action based on the facts of each case and applicable laws.
Does Every Bank Loss of ₹6 Crore Go to CBI?
No. This is an important point.
The ₹6 crore limit applies to fraud incidents involving public sector banks and regional rural banks. It does not mean that every financial loss of ₹6 crore or more automatically becomes a CBI case.
For example, a bad loan, business loss, commercial dispute or court settlement is not automatically treated as fraud merely because a large amount of money is involved.
The incident must first fall under the applicable fraud classification and legal framework. Once an incident is identified as fraud, the bank must report it to the appropriate law enforcement agency according to the monetary limits prescribed by the RBI.
