Mr. Arjun Murali,
1. Generally all the banks obtain loan documents containing a specific clause that, the borrower agrees to pay the variated rate of interest and notice of variation is waived. In such cases there is no need for the bank to send notice to the borrower as and when the bank's Prime Lending Rate (PLR) changes since such notice is waived by borrower as per the clause in the agreement.
2. Bankers have unfettered jurisdiction over all the monies coming to their possession to recieve amalgamate and adjust the general balances in the accounts. This is called Banker's Lein u/s 171 of Indian Contract Act. This statutory right is available to bank unless there is an agreement contrary to such exercise of right. Since funds in SB account are available and there is no agreement or legal bar restraining the bank from invoking Sec.171 of Indian Contract Act,the borrowal account need not be classified as NPA. The borrower also could send a mandate to the bank for adjustment of the defaulted dues by transfering funds from his SB account.
3. Loan documents will not expire by law of limitation as long as payments are made by borrower under his signature as payments save the loan documents from becoming time barred. Another way for banks to save limitation is botaining of 'Debt Acknowledgments',
4. No action can be taken under SARFAESI Act unless 13(2) notice is served to the bank. Direct publication of 13(2) notice is not known to law of enforcement of security interest.
5. If there is no security interest, the bank has to file its claim in civil court or DRT depending upon the amount of debt due.