Loans - Bank provided predatory loans

Dear Client,
Predatory lending is illegal and an unfair trade practice in India, and the Usurious Loans Act, 1918, is the primary legal tool for addressing predatory lending that prohibits lenders from charging excessively high interest rates, which is a hallmark of predatory lending. The Usurious Loans Act is only applicable to private loans or loans made in the unorganised sector. Banks and financial institutions in India are governed by the Reserve Bank of India (RBI), the Fair Practices Code. From the query, it transpires that no legal actions/steps were taken by the borrower or his/her legal heirs in a series of illegal actions of the Bank despite a predatory loan becoming NPA, providing fresh loans applying evergreening techniques to the initiation of recovery proceedings under the SARFAESI Act, which is a serious lapse on the part of the borrower that makes the matter more complex. The limitation period for debt recovery in India is typically three years from the date the cause of action arises, that is, the date when a loan is declared a bad loan or NPA. However, different types of debts may have different limitation periods, and the statute of limitations varies by state and type of debt. Once a debt becomes time-barred, creditors or debt collectors can no longer sue the debtor to enforce repayment unless there is a continued cause of action. Sub-section (3A) of Section 13 of SARFAESI Act 2002 was introduced by way of an amendment in the year 2004 whereby the borrower is allowed to make representation or raise an objection to the notice issued under subsection (2) of Sec.13 of the Act and the Bank shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower. Under Section 17 of the SARFAESI Act, the borrower has every right to prevent the auction and seek a stay even if the house is in symbolic possession. The owner/borrower can approach the DRT or the High Court with a view to pointing out that the bank acted improperly or that there are reasons to grant the stay. If the court agrees with the owner/borrower, then a stay order can be granted to the owner to stop the bank from taking any further action on the property. Section 18(1) of the SARFAESI Act, 2002 stipulates that any person aggrieved by any order made by the DRT under Section 17, may prefer an appeal to the DRAT(Debt Recovery Appellate Tribunal) within 30 days from the date of receipt of the order of the DRT. The 2nd proviso to Section 18(1) stipulates that no appeal shall be entertained by the DRAT unless the borrower has deposited with it 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. The 3rd proviso to Section 18(1) gives a discretion to the DRAT to reduce the aforesaid amount to not less than 25%, provided the DRAT gives reasons for the same, which are to be recorded in writing. Hence, it is advisable to consult with an Advocate experienced in DRT matters for tailored advice and actions to navigate the issue in the right way. You may file a complaint against the concerned Bank to the regulatory authority, RBI online on its grievance redressal portal under the Integrated Banking Ombudsman Scheme at https://cms.rbi.org.in for a quick resolution to the matter, endorsing a copy of the complaint to the concerned Bank. Further, a quick counseling session with a certified credit counselor can help you discover your options and choose the right path to resolve or settle the matter with the Bank.

Dear Client,

To challenge the bank's predatory loans and subsequent SARFAESI recovery as fraud, you must swiftly file an application under Section 17 of the SARFAESI Act with the Debt Recovery Tribunal (DRT), detailing how the bank engaged in predatory lending by approving loans to your grandmother with no income, a clear violation of fair lending practices, and then fraudulently perpetuated the debt through "loan evergreening" providing fresh loans to obscure pending interest and penalties, which is a severe regulatory violation by the bank.

Simultaneously, consider pursuing a civil suit alleging outright fraud, as civil courts can declare the entire loan transaction void. Gather all loan documents, bank statements proving evergreening, and evidence of your grandmother's lack of income, and immediately consult a lawyer specializing in banking and SARFAESI laws to build a robust case demonstrating the bank's fraudulent intent and actions.

You can challenge the bank's SARFAESI recovery by alleging the entire loan is fraudulent, citing predatory lending practices specifically, extending credit to your grandmother when she had no income source and the illegal technique of "loan evergreening." Loan evergreening involves providing new loans to cover existing interest and penalties, which is a fraudulent way to conceal Non-Performing Assets (NPAs) and violates RBI guidelines, demonstrating the bank's bad faith. You should immediately file an application under Section 17 of the SARFAESI Act with the Debt Recovery Tribunal (DRT), and simultaneously consider a civil suit alleging specific fraud against the bank, as recent judgments indicate civil courts can hear such cases even if the DRT's jurisdiction is otherwise exclusive, giving you a broader avenue to declare the loan void due to fraud and predatory practices.