No personal hearing needed before banks tag loan accounts as fraud: SC

The Supreme Court ruled that banks can classify loans as fraud without personal hearings, provided borrowers receive forensic audit reports and can respond in writing. This decision aligns with RBI guidelines, resolving conflicting high court rulings and expediting fraud classification. Experts view the ruling as bank-friendly, emphasizing procedural fairness and regulatory efficiency. Hormuz Mehta, partner at JSA Advocates & Solicitors, said the ruling brings clarity for banks, enabling them to complete fraud classification within the prescribed timeline without the risk of HCs overturning decisions solely because a personal hearing was denied. “By this order, personal hearings are no longer mandated, ensuring there is no delay in the 180-day classification process. This allows an expedited and efficient process while maintaining fairness,” he said. Read more