Rudrakhya Barik

BBA-LLB (Batch of 2019-24)

Answers for the questionnaire provided

1. a. No, I have not been involved in a loan settlement process before.

b. Here's a general overview of the steps involved in the context of loan settlement as per
SARFAESI Act, 2002:
 Issuance of Notice: The lender issues a demand notice to the borrower, specifying the
amount due and providing the borrower with an opportunity to repay the default
within 60 days.

 Representation by the Borrower: The borrower has the right to make representations
or objections to the lender within 15 days of receiving the notice. And if the secured
creditor concludes that such representation or objection is not acceptable, then he
shall communicate of the receipt of representation or objection the reasons for non-
acceptance of the representation or objection to the borrower within such 15 days.

 Clearance of Outstanding Dues: If the borrower clears the outstanding debt within the
specified time (60 days) then settlement is done. If the borrower fails to clear the
outstanding debts then Section 4 of the SARFAESI Act shall be followed.

2. a. Yes, I am aware of the RBI guidelines governing loan settlement by financial institutions

b. Yes, these guidelines are effective in safeguarding consumer interests during loan
settlement.

c. The guidelines for settlement as given by RBI is stated below-

 Payment and Settlement Act, 2007 (The Payment and Settlement Systems Act of 2007
regulates and oversees payment systems in India, designating the Reserve Bank of
India (RBI) as the governing authority. RBI is empowered to establish a committee,
known as the Board for Regulation and Supervision of Payment and Settlement
Systems (BPSS), through its Central Board which is responsible for exercising the RBI's
powers, carrying out its functions, and fulfilling its duties as stipulated by the statute.)

 Guidelines on One Time Settlement Schemes for SME Accounts (If borrowers cannot
pay the full settlement amount at once, they must make an upfront payment of at
least 25%. The remaining 75% should be repaid in installments within one year, along
with interest at the prevailing Prime Lending Rate from the settlement date to the
final payment date.)

 Notification on Change in or Take Over of the Management of the Business of

the Borrower by Securitisation Companies and Reconstruction Companies
(Reserve Bank) Guidelines, 2010 (They establish a system of checks and balances
during the change in or takeover of a borrower's business management by these
entities under Section 9(a) of the SARFAESI Act.)

3. Secured loans are those loans for which the borrower puts any asset to offer as
collateral or security against the loan. This also lowers the risk of the lender. Whereas
unsecured loan are those which does not have any collateral backing. It is solely granted
on the basis on borrower’s credit worthiness and promise to repay.

4. a. Yes, I am familiar with the Debt Recovery Tribunals (DRT) and their functioning in
resolving loan disputes.
 b. Types of loan that can be presented before DRT for resolution are-
 Loan taken from a bank, financial institution, or consortium of banks or financial
institutions during their business activities.
 This loan, whether secured or unsecured, assigned, payable under court order
or arbitration, or mortgage-related, must be legally recoverable on the
application date.
 It also encompasses unpaid debt securities (securities listed as per SEBI
regulation of SEBI Act, 1992)
c. Section 1 (4) of Recovery of Debt and Bankruptcy Act, 1993 provides that the
provisions of this act shall not apply where the amount of debt is less than Ten Lakh
Rupees or such other amount, being not less than one lakh rupees, as the Central
Government may, by notification, specify.
But the Central Government has decided to increase the pecuniary limit for filing debt
recovery applications in Debt Recovery Tribunals (DRTs) from ten lakh rupees to twenty
lakh rupees for banks and financial institutions. Therefore, through sub-section (4) of
Section 1 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the
Central Government specifies that the provisions of the Act will not be applicable when
the debt amount owed to a bank, financial institution, or consortium is less than twenty
lakh rupees.
5. Legal remedies available to a customer while facing harassment by recovery agents include:
Police Complaint: The borrower can file a formal complaint at the police station against the
bank and the recovery office. If the police do not take action, the magistrate can be
approached.
Injunction Suit: The borrower can file a civil injunction suit in a civil court against the bank and
recovery organization. This aims to prevent bank authorities and recovery agents from visiting
the borrower's home for recovery.
RBI Complaint: If the borrower feels threatened, they can file a complaint with the Reserve
Bank of India (RBI), which has prescribed norms for recovery agents to govern their approach
towards defaulters.
Defamation Suit: If debt recovery is based on incorrect information leading to damage to the
borrower's credit score, they can file a defamation suit against the bank and recovery
organization.
Trespass Complaint: If recovery agents illegally enter the borrower's home without consent, a
trespass complaint can be filed for violating the borrower's rights.
Extortion Case: If recovery agents use forceful methods, an extortion case can be filed against
them.
Complaint to the Bank: The borrower can file a complaint with the bank's complaint
department, allowing 30 days for resolution or a response.
Banking Ombudsman: If the bank fails to address the issue within the specified time, the
banking ombudsman can be approached. This official, appointed by the RBI, provides a legally
binding decision to settle disputes between the bank and the borrower. Complaints related to
credit cards are filed with the ombudsman based on the client's billing address jurisdiction.