HC URGES RBI TO COME CLEAR ON ‘FRAUD’ A/Cs

The Telangana High Court on Wednesday sought an explanation from Reserve Bank of India (RBI) that the master and updated circulars being issued to banks to declare certain loan accounts as fraud accounts, follow the Principal Natural Justice or not.

Responding to the contention of some borrowers that their rights were violated, as their explanation was not being heard and principles of natural justice were denied, before their loan accounts were declared as fraud.

A Division bench comprising Chief Justice Raghvendra Singh Chauhan and Justice B. Vijaysen Reddy directed RBI to give their explanation within three weeks.

The bench was dealing with a plea filed Rajesh Agarwal of BS Company. He challenged the decision of the SBI and several other consortium banks to declare his account as a fraud account.

His contention was that he was denied a chance to explain his case.

However, Advocate General of Telangana, B.S Prasad, who also represented SBI, told the Court that the company’s outstanding amount to the Banks consortium had crossed `3,000 crore.

RBI counsel Nalin Kumar said that the purpose behind their master circular was to tackle the ongoing loan f rauds.

The RBI has started coming hard on banks after it detected that they continued to treat a borrower as a normal defaulter despite the promoters’ arrest by investigating authorities for fraud. Following this, many banks started reporting fraud Accounts, he said.

THE BENCH was dealing with a plea filed Rajesh Agarwal of BS Company. He challenged the decision of the SBI and several other consortium banks to declare his account as a fraud account. His contention was that he was denied a chance to explain his case.