SBI to Pay Fine Because It Cancelled A Loan It Already Sanctioned

Bank cancels loan after approval, set to pay 1 lakh fine-Times of India 02.01.2014

CHENNAI: Cancelling a loan that it had sanctioned has earned State Bank of India a stiff fine of 1 lakh. 

The State Consumer Disputes Redressal Commission ruled in favour of a garment export company and directed SBI to pay the owner of the firm the sum as compensation for causing him mental agony. 

The firm's proprietor, K Ramani, applied for a loan of 24 lakh from the Small and Medium Enterprise City Credit Centre of State Bank of India, Egmore.

In his submission to the consumer redressal commission, he said bank officials thoroughly scrutinised documents pertaining to the expansion of his enterprise and sanctioned a loan of 22.5 lakh. He submitted all documents required for the loan, including the title deed of land owned by his daughter as mortgage. 

However, the bank later refused to release the loan, stating that it found discrepancies in the submitted documents. The bank's action was arbitrary and unjust, Ramani said. 

In its counter, the bank said it did release the loan because Ramani had cited an inflated amount for purchases and bank officials had doubts regarding a business unit that had placed an order with his firm. The bank said it could cancel the disbursement of a loan at any stage if doubts arose regarding the viability of the project for which it was extending credit. It said Ramani's daughter was a minor and could not execute a title deed. 

The bench comprising president R Regupathi and judicial member A K Annamalai pointed out that the bank had not verified all documents before sanctioning the loan. 

Though the bank had the authority to reject the loan, the bench questioned the manner in which it exercised that authority, stating that it should not have caused "embarrassment to a customer" and made him "run from pillar to post for several months". The bench said the bank's refusal to disburse the loan after sanctioning it amounted to deficiency in service. 

It directed SBI to pay a compensation of Rs 1 lakh for mental agony to the complainant and 10,000 as costs. However, it said it could not issue directions to the bank to disburse the loan.
http://timesofindia.indiatimes.com/city/chennai/Bank-cancels-loan-after-approval-set-to-pay-1-lakh-fine/articleshow/28253600.cms