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RBI, SBI declare war on willful defaulter.

Date: 22-09-2020
Subject: RBI, SBI declare war on willful defaulter
HYDERABAD: The State Bank of India(SBI) on Monday informed the high court that it questioned B S Company and its owner Rajesh Agarwal about the discrepancies in the way he used the loan availed from it, obtained his replies too for the same and hence it need not give him any fresh opportunity of being heard before declaring his bank account as a fraudulent one. 

Appearing for SBI, advocate general BS Prasad said that RBI issued a master circular and also certain directions asking all the banks to declare such suspicious accounts as fraud accounts and circulate the same message to other banks immediately to prevent similar frauds happening in other banks. 

In fact the master circular and directions of RBI ask the banks to verify such loan accounts and declare them as fraud if enough material is there to do so and it did not specify any hearing opportunity to be given to the evader, the senior counsel told a bench of Chief Justice Raghvendra Singh Chauhan and Justice B Vijaysen Reddy who was hearing pleas by Rajesh Agarwal and few others who described this RBI circular as arbitrary. 

The bench sought to know from the AG whether this circular is depriving the borrowers of an opportunity under principles of natural justice. The AG argued that those who defrauded the bank in an unnatural way, need not be given any opportunity under natural justice principles. In fact the RBI brought out its master circular with this objective in mind and this declaration of a particular account as fraud is only an internal communication and it does not result in any penal consequences automatically. 

In fact, we conducted a forensic audit of Agarwal's loan account and we sought clarifications from him on certain discrepancies found in the forensic audit. He furnished his replies too for that. Though the circular envisages no such opportunity, we had indeed given him such an opportunity, the AG said while urging the court to dismiss the plea. 

According to BS Prasad, SBI alone lost more than Rs 1,500 crore in this loan fraud and if the amount lost by some other banks too was included the extent of fraud may have crossed more than Rs 4,000 crore. RBI counsel Nalin Kumar said that he would explain the essence of, and objective behind the RBI master circular on Tuesday. 

Earlier, senior counsel Mukul Rohatgi argued the case of Agarwal and questioned the validity of RBI circular. The case was posted to Tuesday for further hearing. 


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