What are Early Warning Signals?
Early Warning Signals are indicators, drawn from transactions, financials and conduct, that a loan account is heading towards stress or possible fraud. The RBI Master Directions of July 2024 require banks and larger NBFCs to run board approved EWS frameworks integrated with their operational systems.
Updated 18 August 2026
Key takeaways
- Three Master Directions issued on 15 July 2024 cover commercial banks and AIFIs, cooperative banks, and NBFCs including HFCs, replacing the 2016 regime.
- The framework pairs EWS with Red Flagging of Accounts and must be integrated with core systems and backed by data analytics.
- Indicators are approved by the Risk Management Committee of the Board; the 2024 directions are principle based and prescribe no fixed indicator list.
- For NBFCs, the EWS and RFA mandate applies to the Upper and Middle layers.
What do the 2024 Master Directions require?
A board approved fraud risk management policy with an EWS and Red Flagging of Accounts framework, integrated with the core banking or operational systems, supported by a data analytics and market intelligence unit, and using both quantitative and qualitative indicators. EWS indicators must be approved by the Risk Management Committee of the Board.
A Red Flagged Account is one where suspicion of fraudulent activity is thrown up by one or more EWS indicators. For accounts at or above the CRILC threshold of Rs 3 crore aggregate exposure, red flagging must be reported to RBI within 7 days, and the fraud or no fraud decision is ordinarily expected within 180 days.
The 2024 directions deliberately dropped the prescriptive indicator annex of the 2016 regime. Indicators may draw on transactional data, borrower financial performance, market intelligence and borrower conduct, but each institution owns its list. Any material citing the old 45 indicator list is out of date.
Do EWS requirements apply to NBFCs?
Yes, with layering. The NBFC Master Direction applies to Upper and Middle layer NBFCs and to Base layer NBFCs with asset size of Rs 500 crore and above, but the EWS and RFA framework itself is mandated for the Upper and Middle layers. HFCs are included.
Where do the signals actually come from?
The indicators regulators expect are mostly transactional: inflow deterioration, balance decay, rising utilisation, bounce clusters, new leverage appearing in the banking before it reports to the bureau, and conduct breaks like salary credits stopping or GST filings slipping. That makes continuous statement level analysis the natural engine room of an EWS framework: the same categorised banking that underwrote the loan keeps generating the indicators after disbursal, with evidence attached for the RFA file.
Where this shows up in Fiscus
Fiscus generates transactional EWS indicators from continuous statement analysis, each with page level evidence, which is exactly the material an RFA file needs. See Fiscus for banks.
Frequently asked questions
Read these signals off your own book.
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