The government is weighing a proposal to establish special courts dedicated to handling bank fraud cases, a move aimed at expediting trials and strengthening financial recovery. Officials confirmed that preliminary discussions are underway between the law and finance ministries, with inputs being sought from banks to frame the structure of such courts.
The deliberations will also examine thresholds, including the minimum fraud amount eligible for trial in these special courts.
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Push from Banks and Committees
The idea of specialized courts is not new. A parliamentary committee last year had recommended similar measures to tackle the mounting pile of fraud cases. Banks, too, have been pressing for such a system, citing prolonged litigation as a major reason for low recovery rates.
Executives argue that delays not only reduce recovery but also diminish the value of underlying assets, leading to further financial losses. A quicker judicial mechanism, they believe, will reduce legal costs and strengthen the credit system.
Fraud Numbers Highlight the Need
The urgency of reform is underscored by rising fraud statistics. In FY25, banks reported 122 fraud cases worth ₹18,674 crore, many of which pertained to earlier years but were formally recorded after compliance with Reserve Bank of India (RBI) directives.
Under current RBI rules, banks are required to issue detailed show-cause notices to individuals and entities accused of fraud, a process that already involves extensive due diligence. Once these steps are completed, bankers argue, a fast-track court could expedite verdicts rather than allowing defaulters to exploit procedural delays.
Framework and Oversight Mechanisms
The potential courts would build on existing oversight measures. The Central Vigilance Commission mandates that all state-run banks and financial institutions refer frauds above ₹3 crore to the Advisory Board for Banking and Financial Frauds. The board is empowered to analyze fraud patterns and advise the RBI and CVC on systemic reforms.
Meanwhile, banks are also developing the Digital Payments Intelligence Platform, a not-for-profit company designed to strengthen fraud risk management through real-time intelligence sharing.
If approved, the special courts could mark a significant step in India’s legal and financial framework, bringing speed and efficiency to a sector often slowed by litigation.