RBI issued a new circular on 15 July 2024 to make sure that borrowers are treated fairly before their accounts are labelled as “fraud accounts”.
According to RBI, banks and financial institutions must give defaulting borrowers enough time to respond before classifying their accounts as fraud.
Also, banks must now send notices to borrowers who they think have committed fraud.
These notices need to explain the fraud and give borrowers at least 21 days to respond.
“A reasonable time of not less than 21 days shall be provided to the Persons / Entities on whom the SCN was served to respond to the said SCN,” said RBI.
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