The Reserve Bank of India (Regional Rural Banks – Fraud Risk Management)
Directions, 2026, issued on 31 July 2026, establish a comprehensive framework for
the prevention, early detection, investigation, and reporting of frauds in Regional
Rural Banks (RRBs). The Directions require every RRB to implement a Board-
approved Fraud Risk Management Policy, strengthen governance through a Special
Committee of the Board for Monitoring and Follow-up of Frauds (SCBMF), and adopt
an Early Warning Signals (EWS) and Red Flagged Account (RFA) framework
supported by data analytics for timely fraud detection.
The Directions mandate completion of fraud classification within 180 days of red-
flagging, adherence to the principles of natural justice before classifying an
account as fraud, and timely reporting of frauds to Law Enforcement Agencies
(LEAs) and NABARD. They also require legal audits of title documents for loans of
₹1 crore and above, examination of staff accountability, and prescribe penal
measures, including a five-year restriction on obtaining fresh credit from RBI-
regulated entities for persons or entities classified as fraud after repayment or
settlement.
