If you are stuck in such a situation, here is what to do.

Mr. Alok Sharma, a resident of Navipur, secured a composite home loan of ₹90 lakhs from Apex National Bank in June 2022. The loan was sanctioned for purchasing a plot of land (₹80 lakhs) and for the subsequent construction of a house (₹10 lakhs). The remaining construction expenses were to be covered by his personal savings. As per the loan agreement, the construction was mandated to be completed within a two-year period, by June 2024.

Unfortunately, due to a severe health crisis within his family, a significant portion of Mr. Sharma’s savings was exhausted on medical treatments. This unforeseen circumstance led to a financial shortfall, making it difficult for him to complete the house construction within the stipulated timeframe. In February 2024, well before the deadline, he proactively approached the bank, explained his predicament, and requested an additional top-up loan to facilitate the completion of the construction. However, the bank denied his request.

Throughout this period, Mr. Sharma maintained a flawless repayment record with no defaults. Since Apex National Bank was unwilling to provide further financial assistance, he decided to transfer his loan to another financial institution. He successfully got a loan sanctioned from Suraksha Finance, which included the additional amount required for construction. For Suraksha Finance to disburse the amount, they required an outstanding amount letter from Apex National Bank. When Mr. Sharma visited his bank to request this letter, the branch manager was uncooperative and hostile. The manager threatened to unilaterally revise his loan’s interest rate to a much higher commercial/plot loan rate, applying it retroactively from the date the loan was first disbursed.

Advice in such cases

• Review your loan agreement thoroughly. Pay close attention to the clauses regarding the construction timeline, penalties for non-completion, and the bank’s rights to reclassify the loan.
• Communicate with the bank formally and in writing. Send an email or a registered letter detailing your situation, your request, and the manager’s response. This creates a paper trail.
• Escalate the matter within the bank’s internal grievance redressal mechanism. Contact the nodal officer or the regional head. The contact details are usually available on the bank’s website.
• If the internal escalation does not yield a satisfactory result, you can file a complaint with the RBI’s Banking Ombudsman.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

This situation is primarily a civil matter governed by contract law and banking regulations rather than criminal law.

• Indian Contract Act, 1872: The loan agreement is a legally binding contract. The bank cannot unilaterally alter its fundamental terms, such as the interest rate, unless such a provision is explicitly mentioned in the agreement for specific circumstances. The manager’s threat could be seen as an attempt to coerce you into not transferring the loan.
• Reserve Bank of India (RBI) Guidelines: The RBI has a Fair Practice Code for Lenders which all banks must follow. This code mandates transparency, non-discrimination, and fair treatment of borrowers. A bank’s refusal to provide an outstanding loan statement or threatening punitive action for transferring a loan can be considered a violation of this code.
• Consumer Protection Act, 2019: The bank’s actions, such as refusing to issue a necessary document or threatening to impose an unfair penalty, can be classified as a ‘deficiency in service’ or an ‘unfair trade practice’. You can approach the Consumer Disputes Redressal Commission for relief.

If you are the complainant

• Gather all your documents: the loan sanction letter, the loan agreement, all payment receipts, and any written correspondence with the bank.
• Draft a formal complaint letter to the bank’s higher authorities, clearly stating the facts and the relief you are seeking (i.e., the issuance of the outstanding letter without any change in loan terms).
• If the bank does not respond favourably, file a complaint on the RBI’s Complaint Management System (CMS) portal to reach the Banking Ombudsman.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
• Through your lawyer, you can send a legal notice to the bank, which often prompts a quicker resolution.

If you are the victim

• Do not give in to verbal threats or pressure from the bank manager. Remain calm and firm in your request.
• Document every interaction. If the conversation was verbal, send a follow-up email summarizing the discussion to create a record.
• Understand your rights. A bank cannot arbitrarily change the nature of your loan, especially when you have a valid reason for the delay and have been regular with payments.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

The police generally do not intervene in such matters as they are considered civil disputes related to a contract. They will likely advise you to approach the appropriate civil forum, such as the Banking Ombudsman, a consumer court, or a civil court. Police involvement would only be warranted if there is an element of a criminal offense, such as forgery of documents, fraud, or criminal intimidation. While a threat to take lawful action (even if contractually disputed) may not meet the threshold for criminal intimidation under Section 351 of the Bharatiya Nyaya Sanhita (BNS), it is best to handle this through civil and regulatory channels.

FAQs people normally have

What evidence is required?

To build a strong case, you will need the following evidence:

• The original loan agreement and sanction letter.
• Proof of all EMI payments made to date, showing a clear record.
• Any written communication with the bank, including emails or letters regarding your financial situation and request for a top-up.
• Documents related to the new loan sanction from Suraksha Finance.
• A written record (e.g., a follow-up email) of the conversation where the bank manager made the threat.

How long will the investigation take?

• Banking Ombudsman: The RBI aims to resolve complaints through the Ombudsman scheme within 30 to 90 days.
• Consumer Court: The process can take anywhere from a few months to over a year, depending on the complexity of the case and the workload of the commission.
• Civil Court: Legal proceedings in a civil court are generally more time-consuming and can take several years to conclude.

Advocate Sudhir Rao, Supreme Court of India