Criminal Trident Pack: IPC, CrPC and IEA by Sr. Adv. G.S Shukla and Adv. Raghav Arora
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g.p.srinivas (advocate)     29 June 2022

What happens to personal loan, if the borrower dies

Greetings to my respected colleagues.

Law is common to all.

I am not familiar with the lower court proceedings. One of my family friend, took personal loan from Syndicate Bank in 2005 died in 2007 in an accident. Neither his uneducated wife and minor children were not aware of this. In 2010 Bank people came to their house enquired about him. Wife and kids told that they are not aware of any of his transactions. After coming to know they took signature on some papers telling loan account will be closed, but filed money suit against them showing some fake statements that the deceased remitted money on various dates from 2007 to 2010. Now the appeal is filed in the District Court.

If anyone takes loan from the Bank etc., it is the fundamental responsibility to repay the loan. Since the very borrower died without any information to his family or not attaching any of estate, is his surviving family responsible to repay.

As per my study, personal loan is an unsecured loan, since it is covered with insurance and the debt is of 2005 (17 years) are the deceased borrower family held as defaulters vide the law.

Inputs from the esteemed colleagues is highly appreciated.

Smt.G.Padmavathi Srinivas
Advocate - High Court only



Learning

 7 Replies

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 )     29 June 2022

assets and liabilities automatically transfers to legal heirs of deceased

SIVARAMAPRASAD KAPPAGANTU (Retired Manager)     29 June 2022

When the borrower expires without clearing the loan taken by him, his legal heirs are liable to the extent of the assets of the deceased they inherited.

 

G.L.N. Prasad (Retired employee.)     29 June 2022

The bank is not different from other creditors and only gets priority and attachment of liquid funds through the process of the court.   Personal loans without the security of a third party are very remote.  Further Bank must have issued reminders or EMIs and recall notices also. The statement that family members residing in the address are very very rare as the bank branch must have issued notices and recovery agents might have contacted personally or through phones before proceeding further.  There is no such insurance as assumed for personal loans. in India.

In general, Banks that are having outsourcing recovery agents only entertain personal loans, and they have such arrangement to sell away such personal loans to an outside agency for a discounted rate, and once the loans are handed over to an outside agency, their ways of recovery are almost inhuman.  One can imagine their guts in confiscating the car of an HC Judge when parked at Station.  If the personal loan was granted in violation, the sanctioning officer is personally liable and the bank does not hesitate to recover the same from him or through stoppage or not giving increments for negligence in performing advance.  

All this is subject to a limitation period of 3 years . Those challans of credit signed between 2007 and 2010 may extend the limitation period, only if they are signed by borrowers.  I am afraid that banks do not take such steps risking their reputation and violating norms while recovery of personal loans, as they value good money and do not wish to spend good money when there are no chances of recovery.

Anila Sabu   29 June 2022

Dear Querist,

Your views on the situation is absolutely right.

The bank cannot ask the decedent's remaining family members or legal heir to repay a personal loan or credit card bill if the decedent passes away without making the required payments. There is no collateral because it is an unsecured loan, hence the property cannot be attached.

Banks write it off in this case, adding it to the NPA account.

SHIRISH PAWAR, 7738990900 (Advocate)     29 June 2022

Hello,

I agree with Shivramprasad sir's view that legal heirs are liable to pay the outstanding to the extent they inherit the assets of the deceased. 

G.L.N. Prasad (Retired employee.)     29 June 2022

The query was from an Advocate of the High Court and not a minor issue and much thinking is necessary from the Bank's point of view, law and practice.

 

Dr J C Vashista (Advocate)     30 June 2022

Although the Bank can recover an outstanding amount in personal loan from LRs of deceased through his (deceased borrower's) estate, even if it is "unsecured debt",  yet the subject loan is barred by limitation in the instant case.


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