Banks must employ customer-friendly approach in simple matters, and not harass borrowers

We were recently perplexed by the irrational attitude of a multi-national bank. Varun had taken a personal loan to be repaid in 24 monthly instalments. He paid 14 instalments after which he encountered problems in business resulting in default.

An authorised collection agent of the bank visited Varun at his place in May 2009 and offered a letter from the bank, dated a day later, wherein the bank had agreed for a settlement on payment of Rs. 15,000 within a specified period. This was reduced to Rs. 13,000 after discussions with the agent and the bank's executive, and payment was made, duly acknowledged (hand-written) by the agent in the receipt given.

Since he had the receipt, which carried the words ‘towards full and final settlement', and since there was no further communication from the bank in the last three years, Varun presumed the matter was closed. However, he was in for a surprise, when he recently received a call from another company stating that he owed Rs. 16,000 to the bank and that he was to settle the amount immediately to avoid action.

Varun wrote to the bank at once attaching a copy of the receipt and asked for the issue to be closed. But, the bank refused his request stating that the offer letter was post dated (by a day) and therefore the entire payment was not received within the specified period. Varun was advised to contact the other company for future dealings as the bank had sold all rights and interest in the amount due and payable by him in relation to the loan to the said company.

Disappointed, Varun sought our assistance. We took up the matter with the bank and apart from other points, emphasised that even if the offer letter was received much later, it would be of least importance as anyone would tend to ignore it when they were in possession of the receipt with the words “towards full and final settlement”.

One of the decisions of the Banking Ombudsman said,

A complaint was regarding adverse CIBIL reporting, though full and final settlement was done. On perusal, it was observed that on the backside of the receipt there was a remark ‘the payment is towards full and final settlement'. However, the payment made was credited to the account as usual and the account was not closed, leading to accumulation of charges. The complainant could not get home loan due to adverse CIBIL report. The Complainant approached the bank again but did not get any response.

On BO taking up the matter with the bank, the outstanding was made ‘Nil' and the CIBIL record of the complainant was updated as ‘Settled'. BO observed that since CIBIL record is an important parameter for sanctioning any loan to a person, the bank should be prompt in updating the CIBIL records. In the instant case, since the bank did not correct the record even after several reminders, deficiency of service was established. The bank was advised to pay compensation of ` 5000/- towards the expenses incurred as well as for the mental anguish suffered by the complainant.

This was quoted and the bank advised to revise its decision.

But, the bank refused to see reason yet again and cited arbitrary conditions mentioned on the reverse of the receipt. With the authorised agency being the lawful entity of the bank on such matters, the bank's response is deplorable.

On our advice, Varun has filed a complaint with the Office of the Banking Ombudsman. Though it is agreed that borrowers should settle dues on time, it is important banks employ a more consumer-friendly approach, instead of harassing distressed borrowers.

(The writer works with CAG, which offers free advice on consumer complaints to its members. For membership details / queries contact 2491 4358 / 2446 0387 or


Need for transparencyFebruary 24, 2013