tanvi (none) 20 May 2014
Dear All,
NBFC Company has provided a loan pursuant to a loan agreement. Now the party has defaulted in payments for various months therefore legal proceedings have been initiated. However in between the party had made some part payments.
The question is can the NBFC adjust the payment first towards the outstanding interest and then towards the principal (as per the practice followed by banks)? If yes, kindly provide any norms or case laws where this is written.
adv.raghavan (Advocate,9444674980) 21 May 2014
Every bank will go by its agreement norms entered with the borrower,it is purely prerogative of the bank , how to account late payments. You have to ask bank in this regard,. as court has little say in this regard,till the case reaches its door steps, and the if the same accounting system is under dispute.
RAJU O.F., (Advocate) 08 June 2014
You have stated that legal proceedings initiated. If suit is filed report the remittances, before Court. If suit not filed find out whether part payments save NPA status. Banks & FI s normally credit the remittances first to costs and interest and then to principal. Mostly this would be clearly mentioned in the loan agreement signed by the borrowers.
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