Supreme Court order gives a big jolt to banks: Banks can't hand a borrower a fraud's tag without hearing their story

Supreme Court says an invidual with a fraud tag handed by a bank might have to bear serious consequences in a society. It can also affect an individual's CIBIL score.
Chief Justice DY Chandrachud-headed bench has upheld the Telangana High Court's decision on the same issue.

The decision has come on a petition filed by the State Bank of India, which supported a circular issued by the Reserve Bank of India in 2016, permitting banks to classify accounts of willful defaulters as frauds.

The Apex Court has reiterated that that a person can't be proved guilty without hearing his side of the story. The court said that every person should get a chance to say their side of story. 

The RBI's circular was challenged in the Telangana High Court. In 2020, the Telangana High Court delivered a verdict on the petition filed by Rajesh Agarwal that a borrower should be heard before his account is classified as fraud. SBI had challenged the Telangana High Court's decision in the Supreme Court. The Supreme Court, however, backed and upheld the Telangana's court decision in its hearing today.