Bombay High Court Slams Banks Casual Take On Declaring Accounts Fraud, Asks Anil Ambani To Approach RBI

Raising concerns over the casual manner in which banks classify accounts as fraudulent or in default, the Bombay High Court issued notices to Union Bank of India and the Reserve Bank of India.

The notices were in response to a petition filed by industrialist Anil Ambani, challenging UBI’s October 10, 2024, order that declared his loan account—linked to Reliance Communications—as fraudulent under the RBI’s Master Circular.

A Division Bench of Justices Revati Mohite-Dere and Dr. Neela Gokhale declined to stay the order but directed Ambani to approach the RBI with his grievance.

Judicial Concern Over Bank Procedures

Expressing strong reservations about the way banks handle such classifications, the Bench observed,

“We have come across cases where bank committees merely copy and paste the findings of auditors. The committee must apply its mind. Despite the Master Circular, banks are not complying. They need to be more mindful, and we expect action. If this continues unchecked, it will persist. Public money is at stake, and these orders cannot be passed casually. We must determine whether these actions are deliberate.”

The court emphasized that the RBI must introduce mechanisms to prevent arbitrary classifications and ensure due process.

RBI’s Response

Senior advocate Venkatesh Dhond, representing the RBI, defended the regulatory body’s framework. He explained that aggrieved individuals can file complaints online with the RBI’s grievance redressal department.

“Nobody informs the RBI when a borrower is unhappy with a bank’s decision. A dedicated supervision department can examine such grievances. If there is a violation of natural justice, we issue an advisory. However, the RBI does not evaluate the merits of each case but only ensures that mandatory procedures were followed,” Dhond clarified.

He also assured the court that the RBI would update its FAQs to raise awareness about the complaint mechanism.

Further Proceedings

The court reiterated its concern, stating that banks have yet to frame policies as directed by the 2025 Master Circular. It advised Ambani to formally lodge his complaint with the RBI.

UBI has been directed to submit its affidavit in response to Ambani’s petition within a week. The next hearing is scheduled for March 13.

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