RBI issues matter circular, includes SC directions
In an order, the Supreme Court upheld the petition that sought natural justice and directed the banks to give time and offer detailed explanation the borrower, and also asked the Reserve Bank to issue new directions towards the same.
MUMBAI: Following the March 2023 Supreme Court judgment on classifying an account/borrower as fraud, the Reserve Bank has incorporated certain changes to ensure “natural justice to the borrower” and has issued a new master circular detailing the essential measures to that all lenders–commercial banks, non-banks, housing financiers and all cooperative banks –have to adhere to before classifying fraud accounts.
In an order on March 27, 2023, the Supreme Court upheld the petition that sought natural justice and directed the banks to give time and offer detailed explanation the borrower and also asked the Reserve Bank to issue new directions towards the same.
In a clarificatory order on May 12, 2023 (after SBI sought some changes on the March order), the court led by the chief justice D Y Chandrachud had said, “the March 27 order did not ask a lender to accord personal hearing to the defaulter borrower. Rather we had said that they should be given adequate notice and an opportunity to make a representation.”
The central bank said the latest master circular has been prepared after a comprehensive review of earlier master directions which had laid down the essential measures that a lender’s board must adhere to, before classifying persons/entities as fraud.
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