The circular under challenge had permitted banks to make full use of the Central Fraud Registry for timely identification, control, reporting and mitigation of risks associated with fraud.
The circular contained two provisions:
Once a bank classifies an account as fraud, it is the responsibility of that bank to report the same to the Central Repository of Information on Large Credits platform to alert other banks.
If a bank decides to straight away classify the account as a fraud, it is obligated to report the fraud to RBI within 21 days and report the case to any investigating agency.
The petitioners before the High Court had claimed that borrowers had no opportunity of hearing before their accounts were classified as fraudulent as per the circular.
In effect, the banks were neither giving hearing to the borrowers nor giving them copies of material relied upon before taking further precipitative action, the Court was told.
Source: Barandbench
