Bank ‘auto-debits’ Rs 53,464 on Sunday to close gold loan, woman wins Rs 45,000

The commission added that when the financial assistance is secured by adequate security, the question of invoking banker’s lien, the day on which the loan account became due, especially when that day is a Sunday, does not arise at all, and resort to such conduct is unwarranted, illegal and perverse. Accordingly, we hold that debiting the complainant’s savings account violated the terms and conditions of the loan agreement.

Bank debits account without consent

A woman had availed a gold loan of Rs 90,000 from Canara Bank on March 10, 2023, with the loan maturing on March 10, 2024. According to her, only the annual interest of Rs 10,000 was required to renew the loan. Since the due date fell on a Sunday, she intended to visit the bank on the next working day, March 11, 2024, to pay the interest and renew the loan.

However, on the due date itself, its computerised system debited Rs 53,464 from her savings account without her consent and closed the gold loan account.

The following day, after she approached the bank, she obtained a fresh gold loan and the debited amount was credited back to her savings account. Alleging that the it had acted unilaterally despite the loan being secured by pledged gold ornaments, she approached the commission seeking Rs 50,000 as compensation and Rs 10,000 towards litigation costs for deficiency in service.

Auto-debit was contractual: Bank

It was defended its action by arguing that the loan agreement required the entire loan to be repaid by March 10, 2024, and since the complainant failed to do so, its computerised auto-debit system adjusted the available balance in her savings account towards the outstanding loan.

It was further stated that on March 11, 2024, the complainant paid the remaining Rs 44,775.56, closed the earlier loan account, and simultaneously availed a fresh gold loan of Rs 90,000, which she later repaid.

It argued that the debit was authorised under the loan agreement, the savings account terms, and the banker’s lien under Section 171 of the Indian Contract Act, making its action lawful and justified.

Pledged gold already secured loan: Order

The commission found that the complainant’s claim that only Rs 10,000 was payable to renew the loan was not borne out by the transaction records. The account statements showed that the loan had become due for full repayment on March 10, 2024, and that the complainant later availed a fresh loan on March 11, 2024, part of which was used to clear the outstanding balance of the earlier loan.

However, the commission held that the crucial issue was not whether the loan had become due, but whether the bank was entitled to unilaterally debit the complainant’s savings account to recover the dues. It noted that the loan was a secured loan backed by pledged gold ornaments, and therefore the bank already had adequate security for recovery.

The commission examined the loan agreement produced by the bank and found that none of its clauses authorised the bank to automatically withdraw money from the complainant’s savings account in the event of default. Instead, the agreement specifically empowered the bank to recover its dues by selling the pledged gold ornaments if the borrower defaulted. The bank also failed to produce the savings account opening form to show that the complainant had consented to such automatic debits.

Takeaway

This ruling reinforces that banks cannot unilaterally debit a borrower’s savings account to recover dues unless the customer has expressly authorised such action. It clarifies that where a loan is already secured by pledged assets, banks must follow the contractual recovery mechanism, strengthening consumer rights and ensuring greater accountability in loan recovery practices.

Consumers facing similar grievances may contact the consumer helpline in their respective states (Kerala: 1800-425-1550) or dial the National Consumer Helpline at 1915 for assistance.