Streamlined Regulatory Reporting Across Specified Entities

– Archisman Bhattacharjee & Kaushal Shah | finserv@vinodkothari.com

What is the circular about?

In order to harmonise the procedure of filing of regulatory returns across Supervised Entities (SEs) and create a single reference point, the RBI has issued Master Directions RBI (Filing of Supervisory Returns) Directions, 2024 (‘Returns Master Directions’) on February 27, 2024. As stated in the Statement on Developmental and Regulatory Policies dated August 10, 2023, these directions consolidate and harmonize instructions for filing supervisory/ regulatory returns.  

Who is it applicable on?

The Returns Master Directions cover the following entities, collectively referred to as Supervised Entities (‘SEs’):  

• All Commercial Banks including:
  • Public Sector Banks,  
  • Private Sector Banks,  
  • Small Finance Banks,  
  • Payments Bank,  
  • Local Area Banks, and 
  • Foreign Banks.
  • (excluding Regional Rural Banks)
• Primary (Urban) Co-operative Banks. 
• All India Financial Institutions (including Exim Bank, NABARD, NHB, SIDBI, and NABFID)
• All NBFCs (excluding HFCs)
  • HFCs are excluded as their supervisory role is undertaken by NHB
• All Asset Reconstruction Companies

From when are the new Returns Master Directions effective?

These Master Directions are effective immediately as on the date of notification (i.e. February 27, 2024). 

What are the expectations from regulated entities?

The Returns Master Directions lay out various requirements in terms of data aggregation, data architecture and ensuring accuracy and integrity of data etc which are discussed hereunder.

• Responsibilities of Board and Senior Management:
  • Establishing robust documentation and resource allocation for risk data aggregation and reporting, ensuring specialised staff expertise. 
  • Policies must be formulated to address data quality risks within the risk management framework and to standardise both outsourced and in-house processes. 
  • Place policies on safeguarding data confidentiality, integrity, and availability. Impact analyses are to be conducted for major business initiatives, with the integration of reporting facilities into existing frameworks. 
  • Ensure that structural considerations must not create impediments to aggregation and reporting across group structures, maintaining independence from organisational and geographical constraints.
• Data Architecture and IT Infrastructure
  • SEs must design, build, and maintain robust data architecture and IT infrastructure to support timely and accurate data aggregation and reporting, even during crises. These practices should be integrated into the business continuity planning process, with regular business impact analyses conducted. 
  • Clear roles and responsibilities must be established between business owners and IT teams to maintain alignment with data definitions and internal reporting policies.
• Accuracy and integrity in reporting
  • SEs must reconcile returns and risk reports with internal sources, including accounting data, to ensure data accuracy and completeness. 
  • Automated systems should be implemented for efficient data generation. 
  • Records of data sources and aggregation rules must be maintained, and accuracy monitored regularly. 
  • Additionally, escalation channels and action plans should be developed to address any deterioration in data quality promptly.
• Ad hoc returns/mode of submission
  • Ensuring that resources and IT infrastructure are capable of meeting a broad set of on demand/ad-hoc reporting requests by RBI; and IT infrastructure should be such that it should be able to generate subsets of data as and when required.

What are major actionable for Specified Entities (SEs)?

• Review of the existing practices
  • These Master Directions offer detailed guidance on the preparation of returns, stressing the critical need for data accuracy and aggregation, and specify the precautions that SEs must observe. Furthermore, they elucidate the process for submitting these returns to the RBI, ensuring a standardised approach across the board. It is noteworthy, however, that many SEs already incorporate these practices into their current operations. Thus, it can be said that these Master Directions help in unforming and codifying such practices across the SEs. 
• Changes in policies of SE- Basel guidance may act as a reference
  • In alignment with RBI expectations, SEs are required to integrate comprehensive policies and frameworks within their risk management strategies, specifically aimed at the identification, assessment, and management of data quality risks. This includes establishing rigorous standards for both outsourced and in-house risk data-related processes. Furthermore, SEs must formulate policies that ensure the confidentiality, integrity, and availability of data as part of their risk management framework.
  • For formulating the aforementioned policies and frameworks, SEs can refer to the Basel Committee’s “Principles for Effective Risk Data Aggregation and Risk Reporting,” issued in January 2013. The requirements set forth by RBI in this Returns Master Directions closely align with these principles issued. 
• Actionable for Board
  • The Board of SEs must acknowledge and adhere to their overall responsibilities as outlined in the Returns Master Directions. They should ensure the timely filing of regulatory returns in accordance with the revised timelines specified in the Returns Master Directions. Consequently, SEs must revise their internal policies and procedures to align with these requirements.

What are the changes in the timelines of returns?

A detailed comparison of the existing requirements of filing required to be done by NBFCs compared with the requirements of the Master Direction has been provided below.

Conclusion 

These directions consolidate and unify the regulatory framework for SEs, including Commercial Banks, NBFCs, Urban Co-operative Banks, and Asset Reconstruction Companies. This unified approach not only simplifies compliance requirements but also establishes a singular reference point for SEs, facilitating easier adherence to regulatory standards.

Furthermore, the inception of these Master Directions is largely inspired by the Basel Committee’s ‘Principles for effective risk data aggregation and risk reporting,‘ issued in January 2013. A critical takeaway from the Global Financial Crisis, as highlighted by these principles, was the inadequacy of banks’ IT and data architectures in supporting holistic risk management—specifically, the challenges in aggregating risk exposures and identifying risk concentrations at the group level, across business lines, and amongst legal entities. Such deficiencies in risk management and reporting can significantly compromise the stability of individual banks and the integrity of the global financial system at large.

The stipulations of these Master Directions align closely with the 14 principles set forth by the Basel Committee, aiming to enhance risk data aggregation and risk reporting capabilities among regulated entities.

New requirements as per the Master Directions (effective immediately)						Erstwhile requirements
Return Name	Description	Applicable on	Revised Frequency	Revised referencedate	Days within whichto be reported	Referencedate	Days within whichto be reported	Frequency
DNBS01- ImportantFinancial Parameters	The return captures financial details,viz. components of Assets and Liabilities,Profit and Loss account	i. NBFC-UL,ii. NBFC -ML[except NBFC-CICs]	Quarterly (no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
DNBS02-Important FinancialParameters –	Return captures financials details likecomponents of assets and liabilities aswell as compliance with various prudentialnorms	NBFCs in BaseLayer [except(NBFC – P2Ps)]	Quarterly	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March	Within60 days fromReference Date	Annually
DNBS03-Important PrudentialParameters	The return captures compliance with variousprudential norms, e.g. Capital Adequacy,Asset Classification, Provisioning, NOF	i. NBFC-UL,ii. NBFC -ML[except NBFC-CICs]	Quarterly(no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
DNBS04A- Short TermDynamic Liquidity	To capture the details of mismatch in projectedfuture cash inflows and outflows based on thebusiness projections.	i. NBFC-UL,ii. NBFC-ML[exceptStandalonePrimary Dealers(SPDs)], andiii. NBFC-BL withasset size of ₹100crore and abovesolely or at Grouplevel, [excludingType-I NBFCs,and NonOperativeFinancial HoldingCompanies(NOFHCs), P2Ps,AAs, andMortgageGuaranteeCompanies]	Quarterly(no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
DNBS04B-StructuralLiquidity & Interest RateSensitivity	To capture (i) The details of mismatch inprojected future cash inflows and outflowsbased on the maturity pattern of assets andliabilities at the end of the reporting period	i. NBFC-UL,ii. NBFC-ML[exceptStandalonePrimary Dealers(SPDs)], andiii. NBFC-BL withasset size of ₹100crore and abovesolely or at Grouplevel, [excludingType-I NBFCs,and NonOperativeFinancial HoldingCompanies(NOFHCs), P2Ps,AAs, andMortgageGuaranteeCompanies]	Monthly (no change)	31st March30th April31st May30th June31st July31st August30th September31st October30th November31st December31st January28th or 29thFebruary asapplicable	Within 15 days from theReference Date	31st March30th April31st May30th June31st July31st August30th September31st October30th November31st December31st January28th or 29thFebruary asapplicable	Within 10 daysfrom theReference Date	Monthly
DNBS08-CRILC Main Return	To capture credit information on aggregateexposure of ₹5 Crore and above to a single borrower.	i. NBFC-UL,ii. NBFC -ML(except NBFCCICs), andiii. NBFC-BLwhich are NBFC ICC, NBFC-MFI,NBFC-Factorshaving asset sizeof ₹500 crore andabove solely or atGroup level	Monthly (no change)	31st March30th April31st May30th June31st July31st August30th September31st October30th November31st December31st January28th or 29thFebruary asapplicable	Within 15 days from theReference Date	31st March30th April31st May30th June31st July31st August30th September31st October30th November31st December31st January28th or 29thFebruary asapplicable	Within 21 daysfrom theReference Date	Monthly
DNBS09-CRILC RDB	Reporting of aggregate exposure of ₹5 Crore andabove to a single borrower reported in SMA-0 forthe week	i. NBFC-UL,ii. NBFC -ML(except NBFCCICs), andiii. NBFC-BLwhich are NBFC ICC,NBFC-MFI,NBFC-Factorshaving asset sizeof ₹500 crore andabove solely or atGroup level	Weekly (no change)	Friday of theWeek		Friday of theWeek		Weekly
DNBS10-Statutory AuditorCertificate (SAC) Return	To ensure continued regulatory compliance for all NBFCs.	All NBFCs	Annual (no change)	31st March	Within 5 working days from the date of signing ofthe Auditor’s report in terms of section 134 of theCompanies Act, 2013, but not later than December31st of same year, in any case.	31st March	One month from the date of finalisation ofBalance Sheet.Not later than 31st December.	Annual
Form A Certificate	Information to be submitted by the NBFCs regardingappointment of Statutory Central Auditor (SCA)/Statutory Auditor (SA)	All NBFCs	Annual (no change)	Date of Appointment	Within one month from the date ofappointment of Statutory Central Auditor (SCA)/ Statutory Auditor (SA).	Date of Appointment	Within one month from the date ofappointment of Statutory Central Auditor (SCA)/ Statutory Auditor (SA).	Annual
DNBS11-CICs – ImportantFinancial Parameters	The return captures financial details, viz. components ofAssets and Liabilities, Profit and Loss account, Exposure tosensitive sectors etc.	NBFC-CIC	Quarterly (no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
DNBS12-CICs – ImportantPrudential Parameters	The return captures compliance with various prudentialnorms, e.g. Capital Adequacy, Asset Classification,Provisioning, NOF	NBFC-CIC	Quarterly (no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
DNBS13-Overseas InvestmentDetails	To capture details of overseas investment for all NBFCshaving overseas investment.	All NBFCs	Quarterly (no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
DNBS14- P2Ps- ImportantFinancial & Prudential Parameters	The return captures financials details like components ofassets and liabilities as well as compliance with variousprudential norms for NBFCs-P2P.	NBFC-P2P	Quarterly (no change)	31st March30th June30th September31st December	Within 21 days from theReference Date	31st March30th June30th September31st December	Within 15 daysfrom theReference Date	Quarterly
Financial Soundness Indicators		All NBFCs	Quarterly (New requirement)	31st March/30th June/30th September/31st December				Earlier no requirementto file this
Fraud related returns*The fraud-related returns were revised by way of internal circulars of RBI:1) June 06, 2022 on ‘Introduction of XBRL based online fraud-reporting system for NBFCs2) July 11, 2022 on ‘Commencement of XBRL based online fraud-reporting system for NBFCs3) October 3, 2023 on Migration of historical/legacy FMRs reported by ‘Applicable NBFCs’However, the FM Directions did not reflect these changes.
FMR – I (Report on Actualor Suspected Frauds)	To capture the details of the fraud committed by staff,outsiders or customers involving an amount ofRs 1 lakh or more	NBFC-UL,NBFC -ML, andNBFC-BL whichare NBFC-ICC,NBFC-MFI,NBFC-Factorshaving asset sizeof ₹500 crore andabove	As and when (no change)	Date of detection of fraud	Within 3 weeks fromReference date	As and when	Within 3 weeks fromReference date	As and when
FMR – III** (Update of FormFMR-I)	Reporting to provide updates on events transpired underFMR-I	NBFC-UL,NBFC -ML, andNBFC-BL whichare NBFC-ICC,NBFC-MFI,NBFC-Factorshaving asset sizeof ₹500 crore andabove	As and when	As and when (update date/progress date)	Immediate	31st March30th June30th September31st December	15 days from reference date	As and when
FMR – IV*** (Report onDacoities / Robberies /Theft / Burglaries)	To capture the updated information Report on Dacoities /Robberies / Theft / Burglaries for NBFCs	NBFC-UL,NBFC -ML, andNBFC-BL whichare NBFC-ICC,NBFC-MFI,NBFC-Factorshaving asset sizeof ₹500 crore andabove	Quarterly (no change)	31st March30th June30th September31st December	Within 15 days from theReference Date.	31st March30th June30th September31st December	Within 15 days from theReference Date	Quarterly

*It may be noted that an internal circular of RBI mandated the submission of a new monthly certificate (in substitution of FMR-2 i.e. quarterly submission of outstanding frauds), which provided information with respect to frauds reported during the month capturing the – [ 1) Party name/ account 2) Amount involved 3) Date of reporting]. The said requirement has not been included in the Return Master Directions, which intends to serve as a consolidation of all returns to be filed by regulated entities (in this case NBFCs). As a result, there is ambiguity whether such non-inclusion should be construed as a deliberate discontinuation of the certificate or is an accidental omission.

** As per the erstwhile Master Direction – Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016, FMR III is required to be filed quarterly. However, it may be noted that an internal circular of RBI mandated the submission of FMR III as and when there was an update regarding the frauds captured under FMR I.  Since the said MD has not been repealed under the Returns Master Direction, it seems that the requirement of quarterly filing of FMR III will still survive along with additional requirement in relation to FMR III (as and when updated). Further, this now seems to be filed immediately on the quarter end date unlike the 15 days period from quarter date as was provided under the erstwhile MD.

*** Requirement of filing of FMR-IV was introduced by certain internal circular issued by the RBI which mandated the submission of security incidents ie, Theft, Burglary, Dacoity and Robbery and were to be reported quarterly within 15 days from end of quarter date. This requirement has been now included in the Return Master Direction and the timelines of reporting and frequency of reporting have been kept same in the Return Master Direction as per the internal circulars.