Key Points
Banks in India will not provide a personal hearing to companies before classifying them as 'fraud' accounts, but will re-evaluate the decision if legally challenged..
Some bankers and legal experts believe the procedure may lead to court disputes..
Mumbai: Banks will not give a personal hearing to the management of a company before tagging it as a 'fraud' account but will comprehensively re-examine the decision if the borrower legally challenges the classification on the grounds related to principles of natural justice...
The procedure, aimed at formally codifying the mechanism and steps to classify companies with loans outstanding of 50 crore or more as a fraud account, follows the Supreme Court direction in March 2023 to provide a hearing to the borrower before such a step is taken...
This may serve to the cause of offering principles of natural justice through which an opportunity of hearing has been provided to the borrower," said the model procedure, which has been approved by the managing committee of the lenders' lobby Indian Banks' Association and shared with CEOs of most banks.. ..
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