Death of co-borrower of loan

Querist : Anonymous (Querist) 18 March 2022 This query is : Resolved
My Uncle passed away three months ago. My Uncle had availed Mudra Loan for Business, Car Loan (His wife is co-borrower) and Home Loan taken jointly by self, his wife and his son. After his passing away, we informed the Bank of his demise. Now, the Bank before transferring the funds from his savings account to registered nominee's (his son) account, had cleared the loans availed by him.

The Mudra Loan was entirely cleared.

For the Car Loan, the loan was availed in 2016 and the EMI's had regularly been deducted from his wife's account. Now, the Bank wiped the entire outstanding dues from the savings account, without any intimation to his family members and nor to the co-borrower of the loan, his wife. Is this justifiable on the part of the Bank to clear the dues without any intimation.

Because of this, the family is facing financial difficulties. We have filed the internal complaint with the Bank, but they keep on responding the transactions done to clear the loans.

IS NOT THE BANK REQUIRED TO INTIMATE EITHER TO THE FAMILY MEMBER, OR NOMINEE OR CO-BORROWER OF THE LOAN?

What is the remedy available?

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Quick Summary

When a loan co-borrower passes away, banks may attempt to recover outstanding dues. This discussion highlights a situation where a bank cleared all loan amounts from the deceased's savings account without informing the family or co-borrower, causing financial hardship. While banks can recover debts from legal heirs or co-borrowers, arbitrarily clearing entire balances when EMIs were being paid regularly is questioned. Remedies include escalating the issue to the Bank Ombudsman and potentially the Consumer Commission for compensation.

kavksatyanarayana (Expert) 18 March 2022
The bank authorities may inform you or not. But the legal heirs are bound to re-pay the loans taken by the deceased independently or jointly. Write a complaint to the Ombudsman of Banks by registered post acknowledgment due.

Advocate Bhartesh goyal (Expert) 19 March 2022
It is correct that bank can recover the due and outstanding amount of loan from co-borrower or from legal heirs of deceased borrower but when EMIs of loan are being paid regularly by deceased wife then how can bank recover entire due loan amount from her saving account, it is bank's
arbitrarily act and amounts to deficiency in servicesa.Approach Consumer Commission and claim compensation towards mental and physical agony.

Dr J C Vashista (Expert) 20 March 2022
I endorse the expert opinion and advise of Mr. Bhartesh Goyal ji, the Bank cannot deduct entire amount when EMIs are being paid regularly.
Contact Bank Manager for contra-entry in the loan account of co-borrower(s) before initiation of any legal action against them.

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