RBI asks banks not to deal with defaulted companies following Patna High Court order
Current · Source: Reserve Bank of India · RBI/2006-2007/374 · issued 04 May 2007 · ~1 min read
Quick answerRBI directs all banks to ensure no money transactions are allowed for companies listed as defaulted by the Patna High Court order of April 10, 2007. Banks must advise all branches and report compliance to RBI.
The rule, in the simplest words
Banks must stop all money transactions (like deposits or withdrawals) for companies on a special list from the Patna High Court.
This list names companies that the court said have 'defaulted' (failed to pay what they owe).
Banks have to tell every branch about this rule right away.
Banks must send a report to RBI (the central bank) saying they followed the order.
How it plays out — a real example
A co-operative bank branch officer in Indore checks her branch's account list and sees a company from the Patna High Court's defaulted list. She immediately blocks all deposits and withdrawals for that account, then calls her regional office to confirm the branch has followed the RBI directive.
What changed
The Patna High Court, in a public interest case, ordered RBI to direct all banks to not allow money transactions for companies declared as defaulted. RBI has now mandated that banks comply and report compliance.
What it means for you
Banks must ensure no money transactions (credits or debits) are processed for accounts of the listed defaulted companies. This is a strict directive requiring immediate branch-level action and reporting to RBI.
What you must do
Identify all accounts of companies listed in the enclosed defaulted companies list from the Patna High Court order.
Ensure no money transactions are allowed in these accounts.
Advise all branches immediately.
Report compliance to RBI.
Who it affects
All banks, Branches dealing with accounts of listed defaulted companies, Compliance and operations teams
❓ Common questions
What does 'no money transaction' mean for these accounts?
It means no deposits, withdrawals, transfers, or any other financial activity can be processed in these accounts until further court or regulatory orders.
What if we have no accounts of these defaulted companies?
The circular does not specify, but you should still verify the list and ensure no such accounts exist. The directive requires reporting compliance.
Is there a deadline for compliance reporting?
The circular does not specify a deadline, but it says 'immediately' and to 'report to the Bank about the compliance of the order.' Prompt action is expected.
📜 Read the original circular — full text as issued by RBI
RBI/2006-2007/374
UBD.
CO. BPD. (PCB). No. 41/12.05.001 /2006-07
May
4, 2007
CEOs
of All
Primary (Urban) Co-operative
Banks
Dear Sir / Madam
In
the High Court of Judicature at Patna –
CWJC
No. 13422 of 2006 –
Council
for the Protection of Public Rights and welfare
vs.
Union of India and Others – Regarding
We
have to advise you that the Hon'ble Patna High Court vide its order
dated 10 April 2007 in the captioned matter has directed the Reserve Bank of India
to direct all the banks that the companies listed in the enclosed list, which
have been declared as 'defaulted companies' be not allowed to deal with the money
transaction in their accounts.
2.
You are, therefore, advised to ensure that no money transaction of the company/ies,
declared as 'defaulted companies' by the Hon'ble Patna High Court be allowed in
your bank. Accordingly, you may advise all your branches in this regard immediately
and report to the Bank about the compliance of the order.
3.
A copy of the order dated 10 April 2007 passed by the Hon'ble Patna High Court
in the captioned matter and a copy of list
containing the defaulted companies declared by the Hon'ble Patna High Court are
enclosed for strict compliance of the order of the Court.
4.
Please acknowledge receipt to our Regional Office concerned.
Yours
faithfully,
(N.S.Vishwanathan)
Chief
General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/374 · issued 04 May 2007. The plain-English explanation above is BankPulse’s own independent summary.
Identify all accounts of companies listed in the enclosed defaulted companies list from the Patna High Court order.
Ensure no money transactions are allowed in these accounts.
Report compliance to RBI.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All banks, Branches dealing with accounts of listed defaulted companies, Compliance and operations teams), your first concrete step on “RBI asks banks not to deal with defaulted companies following Patna High Court order” is: “Identify all accounts of companies listed in the enclosed defaulted companies list from the Patna High Court order.” (RBI issued this 04 May 2007).
Circular: RBI/2006-2007/374 -- RBI asks banks not to deal with defaulted companies following Patna High Court order
Issued: 04 May 2007
Action required: Identify all accounts of companies listed in the enclosed defaulted companies list from the Patna High Court order.
Action required: Ensure no money transactions are allowed in these accounts.
Action required: Advise all branches immediately.
Action required: Report compliance to RBI.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3482&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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