Gujarat Exclusive > Gujarat news > Debt Recovery Tribunal in Ahmedabad fines DCB bank Rs5 lakh for levying foreclosure charge on client

Debt Recovery Tribunal in Ahmedabad fines DCB bank Rs5 lakh for levying foreclosure charge on client

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The Debt Recovery Tribunal in Ahmedabad has fined the DCB Bank Rs5 lakh for charging defaulters a foreclosure fee in violation of norms.

The tribunal has asked the bank to deposit the Rs5 lakh in the National Defence Fund.

The presiding officer of the debt tribunal observed that as per the sanction letter, the bank cannot recover foreclosure charges from a client even in case of a default. 

The officer cited several other rulings in which there is no precedence of the bank recovering foreclosure charges even in case of default of home loans. The tribunal said that the financial institutions cannot misuse the SARFAESI Act 2002.

SARFAESI stands for Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

The tribunal observed that India has poor financial literacy and most people fail to understand bank statements. Meanwhile, the banks come up with such complicated accounting systems that even experts find it difficult to decipher it. 

It observed that there was a need for the RBI to come up with a standard accounting system for recovery under the SARFAESI Act.

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Speaking about the case, counsel for the applicant Anilkumar Mundra said that his client had objected to the foreclosure charge being levied by DCB Bank in a recovery notice it had sent to his client. He said if the bank wanted it could have let it go but chose to charge it and so the complainant moved the Bank Tribunal with the recovery notice issued to him.

What tribunal said about DCB Bank and foreclosure charges on a home loan

The tribunal observed that the bank was not forthcoming with information in the case but put forth all the concerned documents after an order by the tribunal asking it to do so. 

The tribunal observed that Rs5 lakh fine in a case involving a loan of Rs34 lakh may seem steep but it is time the RBI conducts an audit of financial institutions that recover foreclosure charges.

The case pertains to one Jayanti Patel, who took a home loan from DCB Bank in the year 2014. He put up his unit Pragati Ply Industries as a security against the loan. 

In 2018, the bank foreclosed the property after Patel was unable to pay the instalments on the loan and during the process, it charged Patel Rs1.37 lakh as foreclosure charges.

 

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