RBI directs banks to provide a 21-day notice to defaulting borrowers before classifying them as 'fraud accounts'.
The Reserve Bank of India (RBI) has instructed banks to give defaulting borrowers a chance to respond before classifying them as 'fraud accounts' following a Supreme Court judgment. Banks must now provide a show-cause notice to fraudulent entities with complete information about the fraud, and a reasonable time of "not less than 21 days" must be given to these individuals or entities to respond to the notice. The RBI's revised Master Directions on fraud risk management also emphasize robust internal audit and control frameworks in banks and non-banking financial companies.
July 15, 2024
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