Overview
- A two-judge bench ruled Tuesday that borrowers have no right to an in-person hearing before a bank classifies their account as fraud under Reserve Bank of India rules.
- Banks must share the full forensic audit report that supports the charge, allow a written reply from the borrower, and issue a fresh reasoned order, with only limited redactions for sensitive third-party data and digital delivery allowed.
- The court clarified that its 2023 Rajesh Agarwal ruling did not create a right to a personal hearing and it set aside High Court directions that had required oral hearings.
- Justices J. B. Pardiwala and K. V. Viswanathan accepted the RBI’s view that oral hearings would slow a document-driven process and could let borrowers dissipate assets or abscond, noting tens of thousands of recent fraud cases worth about Rs 48,244 crore over two years.
- The decision, arising from SBI and Bank of India appeals involving Amit Iron Ore and Lilliput Kidswear, means borrowers must now contest fraud tagging through written responses, while banks move faster within RBI timelines for red-flagged accounts.