One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Mr.X approached me when his student loan application was rejected by ABC Bank. He had initially applied to XYZ Bank but faced delays, so switched to ABC Bank which was located near his college in City A. The loan processing seemed smooth initially, but the bank suddenly rejected his application citing that his sister Mr.Y had taken a settlement on her previous loan. Mr.X was devastated as his admission was at stake. The bank refused to provide detailed reasons and claimed that family credit history affected his individual application. This unfair practice violated several banking norms and consumer protection laws. After reviewing his case, we found multiple legal violations by the bank in their assessment process.

Advice in Such Cases

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 to 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.

• Demand written reasons for loan rejection from the bank immediately
• Request your credit report to verify what information the bank accessed
• File complaint with Banking Ombudsman if unfair practices are identified
• Consider approaching Consumer Court for deficiency in banking services

Applicable Sections of Law

Under the Bharatiya Nyaya Sanhita (BNS), Section 318 covers cheating and dishonest inducement. Banking Ombudsman Scheme provides remedies for deficient banking services. The Consumer Protection Act, 2019 addresses unfair trade practices. Under BNSS, Section 173 deals with investigation procedures. RBI Guidelines on Fair Practices Code mandate transparent loan processing. Credit Information Companies Regulations govern how credit information can be used. These laws collectively protect borrowers from discriminatory lending practices and ensure fair assessment of individual creditworthiness rather than family-based rejections.

If You Are the Complainant

• File written complaint with bank’s grievance cell within 30 days
• Escalate to Banking Ombudsman if bank doesn’t respond satisfactorily
• Submit consumer complaint highlighting deficiency in banking services
• Request detailed credit report analysis from all credit bureaus
• Gather documents proving your independent financial capacity and creditworthiness

If You Are the Victim

• Document all communications with the bank including rejection notice
• Obtain detailed reasons for rejection under RTI Act if necessary
• Challenge discriminatory practices through appropriate legal channels
• Seek alternative lending options while pursuing legal remedies
• Consider approaching other banks with proper documentation of the unfair treatment

How the Police Behave in Such Cases

Police generally don’t get involved in civil banking disputes unless fraud is involved. They may register complaints under BNS if cheating or criminal breach of trust is established. However, most loan rejection cases are handled through banking ombudsman and consumer courts. Police intervention becomes relevant only when there’s evidence of deliberate misinformation or fraudulent documentation by the bank. Civil remedies are more effective in such disputes.

FAQs People Normally Have

Q: Can banks reject loans based on family member’s credit history?
A: Not unless that person is a co-applicant or guarantor. Individual applications should be assessed independently.

Q: What if the bank doesn’t provide written reasons?
A: You can file RTI application and approach Banking Ombudsman for non-compliance.

Q: How long do I have to file complaints?
A: Banking Ombudsman complaints within one year, consumer complaints within two years from the cause of action.

Q: Can I claim compensation for mental harassment?
A: Yes, consumer courts can award compensation for deficiency in services and mental agony caused.

What Evidence Is Required?

• Original loan application and all submitted documents
• Bank’s rejection letter or communication
• Credit reports from all three credit bureaus
• Income documents proving repayment capacity
• Educational certificates and admission letters
• Email correspondence and phone call records
• Witness statements if any verbal assurances were given

How Long Will the Investigation Take?

Banking Ombudsman typically resolves complaints within 30-60 days. Consumer court proceedings may take 6-12 months depending on complexity. If the case involves regulatory violations, RBI investigation can take 2-3 months. Court-based remedies through civil suits may extend to 1-2 years. However, interim relief for urgent educational needs can be sought through appropriate applications.

Advocate Sudhir Rao, Supreme Court of India