The Reserve Bank of India (RBI) has told banks that they must give borrowers a chance to explain themselves before calling their loans ‘fraud’. This means banks cannot just say a loan is a fraud without giving the borrower a chance to tell their side of the story.
The RBI said this in a new rule it made on Monday. It wants to make sure banks are fair to borrowers. Earlier, the top court in India also said the same thing. The court said banks cannot call a loan a fraud without letting the borrower speak first.
The RBI’s new rule says banks must give borrowers at least 21 days to explain themselves after the bank thinks there might be a fraud. The bank must tell the borrower clearly what it thinks is wrong and why it thinks there is a fraud.
The borrower can then tell the bank their side of the story. Only after this can the bank decide if the loan is really a fraud.
The RBI says this new rule is important because it is fair to borrowers. It will stop banks from calling loans frauds without good reason. This will help borrowers who might have been wrongly accused of fraud.
The RBI hopes this new rule will make the banking system fairer for everyone.