The Reserve Bank of India (RBI), on July 31, 2026, issued the Reserve Bank of India (Regional Rural Banks – Fraud Risk Management) Directions, 2026, prescribing a comprehensive framework for the prevention, early detection, investigation, and reporting of frauds by Regional Rural Banks (RRBs). The Directions came into force with immediate effect and establish uniform requirements for fraud risk governance, reporting to Law Enforcement Agencies (LEAs) and the National Bank for Agriculture and Rural Development (NABARD), and strengthening fraud risk management across RRBs.
The Directions require RRBs to adopt a Board-approved Fraud Risk Management Policy covering fraud prevention, early detection, investigation, staff accountability, recovery, reporting, and frameworks for Early Warning Signals (EWS) and Red Flagged Accounts (RFA). They also mandate adherence to the principles of natural justice, including issuance of a detailed Show Cause Notice (SCN), providing a minimum of 21 days for response, examining representations, and issuing a reasoned order before classifying a person or entity as fraudulent. The Board is required to review the policy at least once every three years.
Further, the Directions prescribe procedures for reporting frauds to Law Enforcement Agencies and NABARD, reporting cheque-related frauds, maintaining staff accountability, conducting legal audits of title documents for large-value loan accounts, handling fraud accounts under resolution or transferred to other lenders/Asset Reconstruction Companies (ARCs), defining the role of auditors, and reporting incidents of theft, burglary, dacoity, and robbery. The framework aims to strengthen fraud prevention, governance, regulatory reporting, and accountability in Regional Rural Banks.
[Notification No. RBI/DoS/2026-27/454]
