Supreme Court Flags Banks Casual Approach and Harassment of Small Borrowers

The Supreme Court has expressed strong concern over the way banks treat ordinary borrowers who seek small loans for personal needs. A bench of Justices Ahsanuddin Amanullah and R. Mahadevan observed that common borrowers are often put through a tough and tiring process that, in some cases, can come close to harassment. At the same time, the court noted, banks appear to be far more relaxed while sanctioning very large loans to big entities, many of which later fail to repay.

The remarks came while the court was hearing a petition filed by a Haryana-based company that had taken a loan of about 8.09 crore rupees from the State Bank of India (SBI) in 2019 but defaulted almost at once. According to the court, the company did not repay even a single instalment, and the loan account was declared a non-performing asset within months. The bench called the borrower's later offer to repay only the principal amount, six years on, as too little and too late.

The court refused to interfere with the recovery action taken by SBI under the SARFAESI Act to take over the secured assets, but it allowed the company a final two-week protection to approach the Debt Recovery Tribunal. While dismissing the petition, the bench still questioned how such a large loan was approved in the first place, saying the immediate default pointed to a possible failure to properly assess the borrower's ability to repay.

The court urged SBI to make its loan process easier and fairer, especially for ordinary citizens and people from weaker economic sections. It clarified that it was not asking banks to relax their lending standards, but rather to simplify the procedure both while giving loans and while recovering them. It also suggested that policies on concessions and incentives be graded so that those at the lowest economic level get the maximum benefit.

The court placed these observations against the background of several major loan defaults in the country over the past decade involving large companies. However, it did not pass any binding direction in this case. The bench said it would leave the question of acting against such banking practices for a more suitable case with specific facts, while recording its displeasure for the present.