Banks Must Provide Complete Transaction Details in Fraud Show-Cause Notices

The petitioners challenged separate show-cause notices dated 26 March 2026 proposing to classify and report them as fraud.

They contended that the notices did not provide the transaction, action, or event details required by clause 2.1.1.1 of the RBI’s Master Directions on Fraud Risk Management, and that the forensic audit report and supporting material had not been furnished.

Although the petitioners had submitted replies, the Bank stated that it would provide the required details, permit further replies and personal hearings, and then pass orders in accordance with law.

The petitions were disposed of on the Bank’s undertaking and the Court’s directions.

1. Whether the show-cause notices provided the complete transaction, action, or event details required by clause 2.1.1.1 of the Master Directions.

2. Whether the Bank remained obliged to furnish those details and provide an opportunity to respond, notwithstanding that the petitioners had already submitted replies.

Clause 2.1.1.1 of Chapter II of the RBI’s Master Directions requires a detailed show-cause notice to persons or entities against whom fraud is being examined, setting out complete details of the transactions, actions, or events on the basis of which fraud classification and reporting are contemplated.

The petitioners also relied on State Bank of India v. Rajesh Agarwal, AIR 2023 SC 1859, in support of their claim to a hearing; however, the Court’s stated basis for its directions was the requirement in clause 2.1.1.1.

The Court examined the notices against clause 2.1.1.1 and found that they did not indicate the required transaction, action, or event details.

The petitioners’ earlier replies did not discharge the Bank’s independent obligation to provide that information.

In view of the Bank’s undertaking to furnish the details and afford a hearing, the Court directed completion of the process rather than quashing the notices.

It directed the Bank to furnish the particulars required by clause 2.1.1.1 within 30 days of receiving a certified copy of the order; the petitioners may then submit additional replies.

The Bank must afford sufficient opportunity, including a personal hearing, and thereafter pass orders strictly in accordance with law.

All contentions were kept open.