Kanpur, Mar 15 (KNN) The Banking Ombudsman (BO) upheld imposition of non-compliance penalty on Kanpur based Rakshit Engineering Works Pvt. Ltd, which being unhappy with the services of Kotak Mahindra Bank, tried to change the bank. 

Horrified at the gross unfairness of turn of events, R.K. Gupta, Director of the company alleged that Banking Ombudsman not only ignored the motive behind sequence of events and rather sided with the bank and even disallowed appeal. 

“The moment the Bank was informed of our intention to change Bank, Kotak Mahindra Bank imposed foreclosure charges of Rs 17.81 lakh although we are an MSME and these charges are not applicable on Micro and Small Enterprises as per the Banking Code,” he added.

The company filed the case against Kotak Mahindra Bank in the Banking Ombudsman challenging the demand.  After the case was filed, the Bank promptly dropped demand of foreclosure charges but raised another bill of Rs 58 lakh on account of ‘non-compliance’ charges on a sanctioned limit of Rs 3.50 crore. 

“The reason of non-compliance, the Bank cited was delay in renewal by 179 days which coincided with the peak months of Covid in 2021. Also, the Bank never mentioned about the delay and non-compliance before,” Gupta said.  

The Kotak Mahindra had also alleged that behaviour of borrower was non-cooperative of which they claimed to have the proof of call records. They could not provide the call records though.

But the surprise was the way Ombudsman interpreted the whole thing, disregarded the unprecedented Covid emergency and upheld the non-compliance charges albeit by halving them to Rs 29 lakh, hardly a relief for hapless MSME.

“Irrespective of the facts, the BO clearly considered  version of Kotak Mahindra Bank and the appeal of an MSME was rejected out rightly,” rued Gupta. 

Kotak Mahindra in its defence had said that their standard loan agreement contained the clause of non-compliance charges which was not rejected by the BO.

Further, KMBL mentioned about RBI instructions on transfer of one loan account from one  bank to another, on request by the loanee, which they claimed had not been followed in this case but according to the MSME the details were not provided.

As competition among Banks to acquire good loan accounts, even of MSMEs, is expected to increase in coming days, RBI should come out with detailed guidelines on transfer of loan accounts on request by the loanee, to make the process transparent. (KNN Bureau)