The Supreme Court of India has issued an important decision regarding the classification of bank accounts as fraud. The Supreme court said that banks are not obligated to grant customers a personal oral hearing before declaring their accounts as fraud. However, prior to labelling them, banks must provide customers with a forensic audit report.
This ruling follows submissions made earlier this year by the Reserve Bank of India (RBI) and State Bank of India (SBI), which argued that conducting personal hearings in every case would not be feasible given the scale of fraud in the banking system.
Appearing for SBI, solicitor general Tushar Mehta had told the court that the volume of fraud cases has risen sharply, making individual hearings difficult to implement. He said that introducing such a requirement could disrupt the process of identifying and declaring fraudulent accounts.
Around 60,000 instances of bank fraud were recorded over the past two financial years, involving Rs 48,244 crore – 36,060 cases in 2023–24 and 23,953 in 2024–25. The amount involved in 2024–25 stood at Rs 36,014 crore, reflecting a 194 per cent increase from Rs 12,230 crore in the previous year.
A bench of Justices J B Pardiwala and K V Viswanathan had earlier questioned the absence of personal hearings, noting that such a step is generally linked to principles of natural justice. In response, Mehta stated that banks do not offer personal hearings in these situations, as it may defeat the purpose of the classification process.
In another update, The Central Bureau of Investigation (CBI) is investigating bank loan frauds cumulatively worth Rs 73,000 crore in seven cases registered against the Reliance Anil Ambani Group, according to a status report filed in the Supreme Court in February. Click here to read this news in detail.
