Money & Banking

Son's security held against father's loan

| Updated on March 02, 2011


The complainant approached the banking ombudsman for non-return of jewels which were retained by the bank as security even after clearing of all dues in respect of a loan taken by him.

The jewels were retained by the bank on the plea that the complainant's father had also taken a loan and that it was overdue.

The bank refused to return the jewels to him stating that as the son was a member of the family, his jewels also could be construed as that of the family and, hence, retainable as security for the outstanding loan of his father under the banker's general lien. The bank's stand was not upheld by the ombudsman as the loan was taken by the son in some other context and he had no dues to the bank. The bank was, therefore, directed to return the jewels to the son.

Higher processing and upfront fees: The complainant firm alleged that the bank had charged higher processing and upfront fees for credit facilities without prior intimation.

The credit facilities sanctioned were not utilised as the charges intimated to them after sanctioning the loans were not acceptable to the company.

The company desired to utilise credit facilities from another bank but was forced to pay commitment charges for release of title deeds. The company paid the same under protest so as to get back the security documents. The banking ombudsman advised the bank to produce documentary evidence for having given prior intimation to the complainant for charging higher processing fees. As the bank was not able to provide any documentary evidence, it was advised to reimburse the excess fees levied to the complainant.

Wrongful possession of vehicle: The complainant had taken a vehicle loan of Rs 27,500 for purchase of a two-wheeler in January 2007 and closed the account by June 10, 2008. He later found that his vehicle was missing. He came to know that his vehicle was seized and sold by the bank for Rs 27,500.

As this was a clear case of taking possession of the vehicle wrongly by the bank, the ombudsman intervened in the matter and directed the bank to pay Rs 50,000 as compensation to the complainant towards the wrongful possession of his vehicle besides returning the vehicle in good condition.

(Source: Annual report of the Banking Ombudsman Scheme.)

Published on March 02, 2011

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