RBI Mandates 100% Provisions On Fraud Cases

In conformity with the prudential norms, Reserve Bank of India [RBI] had from time to time directed the banks to keep provisions with respect to the non-performing assets on the basis of classification of assets into prescribed categories. Further, taking into account the time lag between an account becoming doubtful of recovery, its recognition as such, the realization of the security and the erosion over time in the value of the security charged to the bank, the bank should make the provisions against substandard assets, doubtful assets and loss assets.

The RBI, in its Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 1, 2014, provided guidelines with respect to provisioning of such loan accounts where there is erosion in the value of security/the banks have knowledge that the fraud is been committed by borrowers.