The nation's largest PSU bank, SBI, and banking regulator RBI said the Supreme Court on Monday that, given the enormous volume of financial frauds, it was not feasible to provide account holders with individual hearings prior to reporting an account fraud.
According to banking institutions, the nation saw 60,000 instances of bank fraud totaling Rs 48,244 crore during the previous two fiscal years.
Solicitor general Tushar Mehta, speaking on behalf of SBI, responded to a bench of Justices J B Pardiwala and K V Viswanathan's question about why personal hearings cannot be held prior to declaring an account fraud, which is a component of natural justice, by stating that the number of bank frauds has been alarming in recent years and that any personal or oral hearing would derail the entire process of declaring an account fraud.
According to him, there were 36,060 bank frauds in FY 2023–24 and 23,953 in FY 2024–25. In 2024–2025, the total sum involved was Rs 36,014 crore, a 194% increase from Rs 12,230 crore the year before.
According to Mehta, no bank offers personal hearings as doing so could negate the goal of labeling the account as fraudulent. He contended that banks might have to deal with circumstances that would make it impossible to provide the parties involved with an oral or personal hearing.
Additionally, the RBI informed the bench that it has not released a circular requiring personal hearings when reporting account fraud.
The RBI's attorney stated that it would not be practical from an operational standpoint and that if it were made required, bankers would have to devote more time to granting personal hearings than to conducting banking operations.
He claimed that everything cannot be micromanaged by the regulator and that the RBI left it to the prudence of banks to make decisions.
However, the bench stated that there can be circumstances in which a personal hearing should be held for which there are no rules.
In 2023, the Supreme Court ruled that before an account is categorized as fraud under the Master Directions on Frauds, borrowers must be supplied with a notice and given a chance to explain the findings of the forensic audit report in accordance with the principles of natural justice.
Furthermore, a reasoned order must be used to determine whether the borrower's account is fake. Following the ruling, there was debate over whether the account holder's written statement was sufficient to declare an account fake or if personal hearings were required.
