My uncle retired from the bank a few years ago. Now, the bank has filed a case against him as he sanctioned some loans and the customer turned out to be a defaulter. How is my uncle liable for it? What actions can he take?
From India, Gurgaon
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From India, Gurgaon
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Dear friend,
Has your uncle received a summons from the court or just the lawyer's notice?
In what capacity did your uncle work at the bank? What was his designation? It appears that either of these has been sent out of malice towards your uncle, or someone wants to make him a scapegoat. If the court's summons have been received, then not much can be done. He has to hire a lawyer and defend his case. Now his lawyer needs to prove that the sanctioning of the loan was a misjudgment rather than willful negligence.
When he was transferred to the loan department or credit department, did he sign any kind of documents?
In every bank, the department that sanctions the loan is called the credit department or loan department. For assessing the creditworthiness of the applicant, the bank must have prepared some checklist or SOP. However, whether to give credit or not depends on judgment. Sometimes judgment can go wrong. However, how fair it is to hold an individual responsible remains to be seen! Secondly, was he the last person to scrutinize the loan application? What about the audit department? How did this non-creditworthiness escape their attention as well?
In western countries or the USA, the board of directors appoints an outsider as the Managing Director. Sometimes the decision proves disastrous. However, they are just sacked but not sued.
This is the tragedy of India. Persons like Vijay Mallya can default on payments of Rs 1,500 Crore and yet continue their swashbuckling ways or celebrate birthday bashes with fanfare, but a small employee or officer is sued.
Thanks,
Dinesh Divekar
From India, Bangalore
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8032Has your uncle received a summons from the court or just the lawyer's notice?
In what capacity did your uncle work at the bank? What was his designation? It appears that either of these has been sent out of malice towards your uncle, or someone wants to make him a scapegoat. If the court's summons have been received, then not much can be done. He has to hire a lawyer and defend his case. Now his lawyer needs to prove that the sanctioning of the loan was a misjudgment rather than willful negligence.
When he was transferred to the loan department or credit department, did he sign any kind of documents?
In every bank, the department that sanctions the loan is called the credit department or loan department. For assessing the creditworthiness of the applicant, the bank must have prepared some checklist or SOP. However, whether to give credit or not depends on judgment. Sometimes judgment can go wrong. However, how fair it is to hold an individual responsible remains to be seen! Secondly, was he the last person to scrutinize the loan application? What about the audit department? How did this non-creditworthiness escape their attention as well?
In western countries or the USA, the board of directors appoints an outsider as the Managing Director. Sometimes the decision proves disastrous. However, they are just sacked but not sued.
This is the tragedy of India. Persons like Vijay Mallya can default on payments of Rs 1,500 Crore and yet continue their swashbuckling ways or celebrate birthday bashes with fanfare, but a small employee or officer is sued.
Thanks,
Dinesh Divekar
From India, Bangalore
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What post was your friend working?
Loans are sanctioned by the bank following a due process. No single person can sanction a loan. The full facts of the loan sanction process will have to be examined and what role your friend played.
If a case has been filed, then you have no choice but to hire an advocate and defend your position in court. After how many years did the customer become a defaulter? What was the bank doing when the individual did not pay his installments on time?
How many years have elapsed since your uncle sanctioned the loan and the person has become a defaulter?
From India, Pune
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Loans are sanctioned by the bank following a due process. No single person can sanction a loan. The full facts of the loan sanction process will have to be examined and what role your friend played.
If a case has been filed, then you have no choice but to hire an advocate and defend your position in court. After how many years did the customer become a defaulter? What was the bank doing when the individual did not pay his installments on time?
How many years have elapsed since your uncle sanctioned the loan and the person has become a defaulter?
From India, Pune
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Can you please clarify the following points:
1) What exactly is the charge?
2) Whether the charge is of civil nature or criminal nature.
3) Under what section of which Act?
4) How many of the retired or working employees have been made part of the charge sheet?
Thank you.
From India, Delhi
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1) What exactly is the charge?
2) Whether the charge is of civil nature or criminal nature.
3) Under what section of which Act?
4) How many of the retired or working employees have been made part of the charge sheet?
Thank you.
From India, Delhi
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Divekarji, to add to what you have written, still banks write off crores of rupees at the behest of political parties, especially during election time. Loans are paid to the vote bank for frivolous reasons with the only objective of writing it off later. Most of the loans for farmers are fake, given to chamchas.
From India, Bengaluru
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From India, Bengaluru
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I fully second Mr. Sundaram.
If a legitimate businessman approaches for a loan - without political backing, he will be given a loan after strict scrutiny and with adequate security and surety. However, when another class of people apply, all caution is thrown to the winds, and eventually, we taxpayers are burdened with write-offs, capital infusions. Learned and highly-paid bank employees will write theses and give big lectures about some macroeconomic factors that lead to NPAs and then move upward on promotion.
It is the bank employees (at higher levels), the finance ministry, and the politician crowd who have destroyed our banking system. Our industries lack the skill to survive without permanent tax concessions, excise duty tweaks, and a captive market protected by import duties.
From India, Pune
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If a legitimate businessman approaches for a loan - without political backing, he will be given a loan after strict scrutiny and with adequate security and surety. However, when another class of people apply, all caution is thrown to the winds, and eventually, we taxpayers are burdened with write-offs, capital infusions. Learned and highly-paid bank employees will write theses and give big lectures about some macroeconomic factors that lead to NPAs and then move upward on promotion.
It is the bank employees (at higher levels), the finance ministry, and the politician crowd who have destroyed our banking system. Our industries lack the skill to survive without permanent tax concessions, excise duty tweaks, and a captive market protected by import duties.
From India, Pune
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Sanctioning of a loan by a bank is not an individual's decision, but there are several checks and balances in place. Despite all precautions, things may go wrong for an enterprise due to environmental factors undergoing sudden changes. This can include physical, political, or market-related environments.
Just the other day, I was reading about how millions of dollars were invested in making an amusement park that was hit by a severe cyclonic storm (a rare occurrence in that area) on the very day of its inauguration and practically got washed away.
Consider the example of the pager industry, which was essentially killed off in its infancy due to the rapid development of mobile phones. Was it the fault of the managers who sanctioned the loan to a pager company?
Most importantly, will the bank share profits with your uncle for those loans that were sanctioned by him and are being regularly serviced by the debtors?
From India, New Delhi
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Just the other day, I was reading about how millions of dollars were invested in making an amusement park that was hit by a severe cyclonic storm (a rare occurrence in that area) on the very day of its inauguration and practically got washed away.
Consider the example of the pager industry, which was essentially killed off in its infancy due to the rapid development of mobile phones. Was it the fault of the managers who sanctioned the loan to a pager company?
Most importantly, will the bank share profits with your uncle for those loans that were sanctioned by him and are being regularly serviced by the debtors?
From India, New Delhi
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Any suggestion would depend on the present status of the investigation/proceedings. If the matter is still in the investigation stage and there is a real apprehension of being arrested, anticipatory bail could be sought. If the matter has already reached the court and summons have been issued, the charges need to be met/dealt on merits.
From India, Kochi
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From India, Kochi
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Sir, in my opinion, the retired bank officer can seek help to defend his actions on the following points, if applicable in his case:
(a) Whether the defaulter has paid any installments, if any, has not been disclosed. Presuming that the default has occurred after payment of some installments, if the defaulter has paid many installments after the sanction of the loan and became a defaulter later on, then the loan sanctioning authority is not responsible.
(b) Since the sanctioning officer has retired for a few years (the exact number of years he has been retired has not been disclosed), the departmental action at this stage is time-barred. Help can be sought from the terms and conditions of employment, similar to the case of Central Government employees where it is stipulated that no departmental action can be taken against retired central government employees after a specified time without the approval of the Honorable President/Competent Authority.
(c) The departmental action has not been taken against any junior officers (if there are any) who investigated the case for the loan sanction and made recommendations for the sanction of the said loan to the retired Officer.
(d) The loan was sanctioned strictly following the instructions of the bank as they existed at the time of sanctioning the loan. The retired officer must examine the instructions applicable at that time.
Further, my above points are based on presumptions, and in my opinion, everything will depend on the facts of the case and the charges leveled against the retired bank officer.
From India, Noida
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(a) Whether the defaulter has paid any installments, if any, has not been disclosed. Presuming that the default has occurred after payment of some installments, if the defaulter has paid many installments after the sanction of the loan and became a defaulter later on, then the loan sanctioning authority is not responsible.
(b) Since the sanctioning officer has retired for a few years (the exact number of years he has been retired has not been disclosed), the departmental action at this stage is time-barred. Help can be sought from the terms and conditions of employment, similar to the case of Central Government employees where it is stipulated that no departmental action can be taken against retired central government employees after a specified time without the approval of the Honorable President/Competent Authority.
(c) The departmental action has not been taken against any junior officers (if there are any) who investigated the case for the loan sanction and made recommendations for the sanction of the said loan to the retired Officer.
(d) The loan was sanctioned strictly following the instructions of the bank as they existed at the time of sanctioning the loan. The retired officer must examine the instructions applicable at that time.
Further, my above points are based on presumptions, and in my opinion, everything will depend on the facts of the case and the charges leveled against the retired bank officer.
From India, Noida
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Dear Shri Harsh Kumar Mehta,
Your points are valid defenses. However, we are not aware of the circumstances and events that led to the loan being sanctioned and when it started deteriorating. Is it clear that only one person is being charged/sheeted, inquired into, or facing legal proceedings?
The statute of limitations could also be a strong technical defense. The poster needs to provide further details; currently, they have posted but not responded to many inquiries from knowledgeable members.
From India, Pune
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Your points are valid defenses. However, we are not aware of the circumstances and events that led to the loan being sanctioned and when it started deteriorating. Is it clear that only one person is being charged/sheeted, inquired into, or facing legal proceedings?
The statute of limitations could also be a strong technical defense. The poster needs to provide further details; currently, they have posted but not responded to many inquiries from knowledgeable members.
From India, Pune
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