Can there be a criminal case for default of loan taken from bank?

Tilak Marg Forum for Legal Questions Forums Business Law Can there be a criminal case for default of loan taken from bank?


This topic contains 1 reply, has 2 voices, and was last updated by Dr. Ashok Dhamija Dr. Ashok Dhamija 9 months ago.

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  • #3855


    I had taken a loan of about Rs. 4 lakh from the bank under the Cash-Credit account for my business. I have been regularly paying the interest in the said account and balance has been below the permissible limit. But, now for last about 6 months, I have not been able to pay the interest and the balance amount is now over and beyond the limit sanctioned by bank. The bank is threatening action against me. I want to repay the loan but I am having some genuine difficulties since my business has not doing well for last one year. Can the bank file a criminal case against me by lodging FIR against me with police? I am asking this since the bank manager is threatening like this.

  • #3862

    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.

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