My client has a loan account with a bank (I am a CA). An amount of Rs. 250,000 was outstanding in that loan account for last about 5 years. But the bank did not file any civil suit to recover this amount or in DRT etc. Now, it is heard that the bank has assigned this case to a recovery agent for filing suit. Can it be done after 5 years? What is the limitation period? Is it not 3 years for recovery of loan?
The general legal provision for limitation period for filing a suit for recovery of money is 3 years. This applies to recovery of loans by banks also.
However, please remember that if your client has acknowledged the loan, paid any instalment or paid interest, etc., in the meanwhile, then the limitation period may start running afresh and will be counted from such date.
So, if your client has not acknowledged the loan or paid any interest, or paid any instalment, etc., to the bank, then the said loan may have become time-barred. But, if there is any such acknowledgement, payment etc. before the expiry of the limitation period, then the limitation period of 3 years will be counted from such date.
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