Is it within the legitimate rights of a bank to seek to move a standard asset in the form of a vehicle loan to a non-banking finance company (NBFC) located at a place away from the customer and without taking him on board?
No, according to the ruling given by the Office of the Banking Ombudsman (BO) attached to the Regional Office of Reserve Bank, Thiruvananthapuram.
In a case reported by the BO for Kerala, the Union Territory of Lakshadweep and Mahe, the complainant had taken a loan for a light commercial vehicle from a bank branch near to his house. Despite the account being a standard asset, the bank had gone ahead to sell it to an NBFC which had an office 100 km away from the transferee bank branch and the residence of the complainant.
On taking up the matter, the bank submitted to the office of the BO that his loan was part of a loan portfolio assigned to a registered NBFC.
The NBFC had also taken over the servicing responsibilities of the loan. The bank said the assignment was in terms of the terms and conditions accepted by the complainant at the time of sanction of the loan.
But the office of BO found that as per the terms and conditions, it was stated inter alia that the borrower would continue to discharge in full all his obligations under the loan terms and other transaction documents to the bank only.
It observed that the borrower cannot be put to inconvenience by requiring him to approach an NBFC for the monthly repayments.
The bank was advised that the complainant's request to the bank to continue the servicing of his vehicle loan at the original branch was legitimate and the bank had to consider it favourably. The bank eventually complied with the BO's instruction in the matter.
(Disclaimer: RBI does not vouch the propriety or legality of orders passed by the Banking Ombudsman. The object of releasing the details of cases is merely for the purpose of dissemination of information on the working of the BO Scheme.)
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