REGULATORY · INDIA
Bombay High Court lifts stay on banks’ fraud-classification action under RBI Master Directions
Change
The Bombay High Court quashed a December 2025 single-bench interim stay, allowing three public sector banks to proceed under RBI Master Directions to classify Anil Ambani and Reliance Communications’ accounts as fraud (judgment released Feb 24, 2026).
Why it matters
By setting aside the December 2025 interim order, the Bombay High Court removed the judicial pause that had blocked three PSU banks’ action under RBI Master Directions to classify the borrower accounts as fraud. The court stated that not every violation of the RBI fraud directions is open to judicial scrutiny, narrowing the scope for court intervention at the interim stage. This shifts leverage back toward lender banks in ongoing fraud-classification processes and reduces the likelihood that procedural challenges alone will halt such actions. The decision also revives the role of the auditor (BDO India LLP), which was an appellant alongside the banks. Timing: the bench decision was dated Feb 23, 2026 and made available Feb 24, 2026.
Implications
- • Fraud-classification process against the borrower can resume without the prior stay.
- • Interim court relief may be harder where challenges hinge on directions-violation claims.
- • Lender banks’ ability to act under RBI Master Directions is reinforced in this case.
- • Auditor involvement in contested fraud-classification actions gains judicial backing here.
Who is affected
- • Public sector banks using RBI Master Directions to classify borrower accounts as fraud
- • Large corporate borrowers and promoters facing fraud-classification proceedings
- • Auditors and forensic firms engaged in bank-led fraud identification processes
- • Reserve Bank of India (RBI) supervisory and enforcement framework stakeholders
Source
Topics
Law & Public Safety Court Rulings Compliance Finance & Banking Banking Regulation