Supreme Court gave a big decision in the case of non-payment of loan EMI, issued these instructions to banks
A master circular from the Reserve Bank directs banks to classify loan accounts of willful defaulters as fraud. This master circular of the Reserve Bank was challenged in many courts. Let us know about it in detail.
HR Mandi Bhav News (New Delhi). Many times people take the help of loan to meet some sudden need or to complete some big task. Many times people also take loans from banks to expand their business. Some of these cases also come to light in which the borrower is unable to pay the loan installments of the bank and the bank declares his loan account as a fraud. Now banks will not be able to do this like before. The Supreme Court has given a latest decision in this regard.
Defaulters will get this opportunity
The Supreme Court, while hearing a case on Monday, said that before declaring any loan account as fraud, the lender should be given an opportunity to present its side on behalf of the banks, because this step of the banks affects the CIBIL score of the person concerned. But it has a bad effect. The bench led by the Chief Justice, while hearing the case, said that banks cannot unilaterally declare the account as fraud without giving the defaulter an opportunity to present his side.
Supreme Court made such comment
Apart from this, the bench also said that in case of declaring a loan account as fraud, there is no need to take such steps even before registering an FIR. The Supreme Court said that declaring a loan account as fraud is tantamount to blacklisting the concerned borrower. The apex court was considering the decisions of two High Courts in this regard.
What does RBI circular say?
Actually, Telangana High Court and Gujarat High Court had given verdict on the master circular related to frauds of Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select Fls Directions 2016). This master circular of the Reserve Bank directs banks to classify loan accounts of willful defaulters as fraud.
This was the decision of the High Court
This master circular of the Reserve Bank was challenged in many courts. Telangana High Court, facing one such challenge, had said that not giving the right to present the case is a violation of the constitutional rights of the borrower. The Supreme Court has also agreed with the opinion of the Telangana High Court.