Bank directed to refund loan-processing fee

THIRUVANANTHAPURAM Jan. 28. The District Consumer Disputes Redressal Forum has directed the State Bank of Travancore (SBT) to refund the bulk of the amount taken from a private hospital group as processing fee for a loan application that was eventually rejected.

In his ruling, the Forum president, N. Haridas, observed that the technical study had to be conducted by the bank team, and while rejecting a loan, it is not at all justifiable that such a heavy amount is sought to be spent for a study conducted by the bank for its own security.

In the circumstances, the Forum allowed Rs. 15,000 as a reasonable sum for investigating (processing) expenses and directed that the balance amount of the deposit be refunded to the complainant. Hence, the Forum directed the SBT to pay the complainant Rs.1.33 lakhs with a future interest of 1.5 per cent along with litigation costs of Rs. 1,500.

The case of the complainant, T.V. Gopalakrishnan, managing director of the Speciality Hospital Group (P) Ltd., Nedumangad, was that the hospital had approached the SBT for an expansion programme. As required by the bank, Rs. 1.48 lakhs had been deposited as initial deposit.

However, the bank, which undertook a six-month specialised study, rejected the loan after assessing the project as economically unviable at a fairly advanced stage of negotiations. And, the bank's refusal to return the Rs. 1.48 lakhs to the applicant even after rejecting the loan became the core of the dispute.

The SBT contended that the deposit was intended as the cost of a study by its technical committee that enquired into the project. The committee conducted a detailed feasibility study and finally concluded that the project was unviable.

Going into the merits of the case, the Forum noted that every bank had its own parameters for processing loans and it was their (the banks') assessment and discretion to sanction a loan or not. But when the conduct of the bank leads to the impression that the loan will be sanctioned and the complainant is preparing for a prospective scheme, the bank comes under the rule of `promissory estopel'.

Narrowing down on the question of whether the complainant was entitled to claim refund of the initial deposit, the Forum observed that the stand of the bank in refusing to refund such a huge amount even without sanctioning the loan was not justifiable, the Forum observed.

``Such technical study shall be part of the scheme of the bank itself, and in case loan is sanctioned, that can be credited as part of the loan. But it is illegal and unjust to ask for such a heavy expense when the loan is going to be rejected."

The Forum further ruled that only when the loan is sanctioned, the legal fee shall be collected. When the loan is rejected, the bank asking for a substantial amount as processing fee or investigation fee appears unusual and illegal, the Forum stated.

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