“She stood in her house, doused in petrol and holding a lighter in her hand… threatening to set herself on fire,” Lathika (name changed), a bank manager of a nationalised bank in Kerala recalls an incident during a property attachment process a few months ago. The woman owed the bank an amount of Rs 12 lakh.
Attaching a property refers to the system where a bank, in the event of an unpaid or partly unpaid loan, takes control of and sells the collateral put up by the borrower to recover the unpaid amount.
“Neither our officers nor the police could move in. On the other side, a huge crowd was shouting at us, asking us to go back. They were blaming me for torturing the 60-year-old woman. Imagine what my situation would have been for the rest of my life if she had set herself ablaze,” says Lathika.
Every other day, there are reports of people protesting against property attachment procedures of banks: Suicide threats, sit-in protests outside the bank, attacking bank officials, breaking into the house or property that has been locked by the bank. Many instances – like the Preetha Shaji case – point to the unfair practices of banks and bank officials when it comes to loan recovery. But bankers say that’s not always the case – and insist that loan recovery is an important part of keeping the banking industry alive.
‘Public anger based on misconception'
On May 14, Kerala witnessed the suicides of Lekha (40) and her daughter Vaishnavi (19) in Neyyattinkara, Thiruvananthapuram district. The family claimed the duo killed themselves following torture from Canara Bank over loan recovery. This triggered huge outrage against Canara Bank in the area, with some political activists even vandalising the bank’s office. The media had also reported that the bank moved to attach the property too soon and had been pressuring the family. However, a suicide note which was later recovered from the house revealed that the duo killed themselves due a family issue.
Had the note not been found, bank manager Sasikala Maniramakrishnan could have been charged with abetment to suicide. “I was in a state of shock until the suicide note was revealed,” she had told media then.
The family took the loan in 2005, and stopped repaying in 2010.
According to bank manager Lathika, many have the misconception that banks ask borrowers to pay more than what they actually owe, because they don’t factor in interest.
“However, when a person takes a home loan for 20 to 30 years, the amount may triple over the course of repayment as this includes the interest rates as well. The interest rates are transparent and customers are well aware of this even before they take the loan,” Lathika says.
While there is criticism over the interest rates charged by banks, bank officials claim everything is transparent from the get go, and they should not be blamed for following the rules.
‘It’s public money that is lost’
According to banking officers, the non-performing assets (loans or advances for which the interest payment is overdue for 90 days) of nationalised banks are steadily increasing.
“Most banking loans are given for developmental activities. But when it is not recovered, the economic balance is lost. We need economic discipline for the functioning of this system," says Jacob P Chittattukulam, All India Joint General Secretary of Canara Bank Officers’ Association.
Abraham Shaji John, the state secretary and joint secretary of the All India Bank Officers' Confederation (AIBOC), tells TNM, “If the borrower cannot repay the amount, the public sympathises with them. Similarly, if a depositor has not received his money, the public will again be against the bank. They don't realise that it is the depositor's money that we give out as a loan. It is the public’s money after all.”
When bankers are in a spot
Jacob also points out that there are certain groups in Kerala seeking to dismiss the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002. This law allows banks to attach properties that are pledged.
These groups have been seeking the dismissal of the Act as many are being trapped by bank loan agents, who act as middlemen between banks and those who take loans. Such agents take a huge amount of loan from the bank after holding the borrower’s property as mortgage, and give them only one-fourth of the amount. The borrowers who get cheated have no idea that they actually owe a huge amount to the bank. These groups allege that banks are also part of this scam. TNM had earlier reported about families getting cheated by such agents.
But bankers say that some people misuse the support of these groups.
Manoj*, a banker from Ernakulam, recounts how a man took help from a such a group against the SARFAESI Act to break into his house, which was locked by the bank.
"The man took a business loan and repaid the exact amount he borrowed. He, however, did not pay the interest due to the bank. We waited for almost six years, after which we started the attachment proceedings. But he came with a group of people and broke into the house we had locked. Till now, we have not been able to attach the property," he says.
“A bank is a business organisation. We cannot afford to have a bad name in the public. So if there is a local protest, such as the instance I mentioned, we would wait for one or two years to attach the property again. Though legally we are in the right, we wait for the public to calm down in a few cases," Manoj adds.
In many other cases, Abraham Shaji says, after understanding the situation of the customer and over humanitarian concerns, bankers do reduce interest rates on the loan.
“However, because of growing protests against the bank in such situations, bankers have become scared. As a result, they have become hesitant to provide loans and started making rules stringent,” he adds.
Jacob says that there have also been instances where officers are dismissed just before their retirement over issues related to granting loans. “If we are not able to get back the loan amount, or somebody deceives us with wrong documents, officers are punished, and even dismissed,” he says.