Default in repayment of a loan or interest thereof is not a criminal offence. It is a civil matter for which the bank can file a civil suit for recovery, or in appropriate cases, proceed under the provisions of the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) to recover its dues.
There may be a few cases where the loan itself was sanctioned in violation of various rules of the bank as a conspiracy to help the borrower. This may be by way of giving forged papers for giving security for the loan, or giving loan in excess of limits without verifying the credentials of the borrower, or by other irregular ways. In such cases, the concerned bank officers may also be involved in the illegal sanctioning of the loan to the borrower. Sometimes, in such cases, criminal cases are registered for illegal sanctioning of the loan in the first instance itself.
However, if the loan was properly sanctioned as per the rules of the bank, then a subsequent default in the repayment of the loan or interest thereof would only be a civil matter and not a criminal case.
Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.
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