Misuse of SARFAESI Act: Borrower Concerns and Banking Practices

Summary: The article discusses rising dissatisfaction among Gen Z and argues that increasing preference for salaried employment over entrepreneurship is linked to the perceived security and predictability of jobs compared with the risks and complexities of business. It highlights concerns including taxation and compliance burdens, customer and supplier-related risks, difficulty obtaining business finance, high borrowing costs and challenges in accessing MSME support schemes. The article then presents an unnamed borrower’s case involving a long-standing banking relationship, delayed renewal of a cash-credit facility, alleged violations of RBI norms concerning NPA classification, complaints against banking practices, subsequent SARFAESI proceedings and sale of mortgaged property. It states that the account was classified as NPA despite the author’s contention that the prescribed 90-day conditions were not met and that corrective action applicable to MSMEs was not followed. The article alleges that multiple policies and procedures were violated, that the property was sold at a low price, and that the borrower’s business and goodwill were severely affected. It refers to RBI/DOR/2025-26/164, DOR.STR.REC.83./21.04.048/2025-26 dated 28.11.2025, Clause 7, and calls for RBI to review how policies are applied. The article concludes by linking such experiences to youth preference for secure government or salaried employment.

Gen Z Dissatisfaction and Declining Entrepreneurship

Our beloved Prime Minister is really working hard day and night so that our Country Can be Vishwa guru and generation will remember his hard work. Peoples of age 45 and will be remembering India before Atalji and what Atalaji gave to our country

But despite working hard for the Country day and night last 12 year we have recently seen huge dissatisfaction of Gen Z.

This agitation had force us to think as to why the dissatisfaction is rising. There are many factors which needs to be discussed. This is a generation which had acquired good amount of knowledge but still they trust any one and again trust no one. Trust is impacted by Social Media Viewership

Today Every youth wants Good Job Hardly Youths wants to be Entrepreneurs This is a vast difference between two generation Till few years back many wanted to Be Entrepreneurs In facts kid of family Business owner even after higher studies was found to join Family Business but now a days even well to do family are advicing their generation to do high education and search Good Job.

If Middle class families adopts this culture in next few years unemployment will rise drastically as Entrepreneurship is ending.

Job Security Versus Business Complexity

Thus it needs to be understand as why People are more inclined to Job whereas the freedom which is there is Entrepreneurship is never in Job. The answer is comfort of Job VS the complexity in Business, Job might give less salary compared to Business but gives comfort of confirm salary. In todays era Job is also not a easy task. In fact Job which have good salary and perk the hard work there is as high as Entrepreneurs sometime even much higher but the only comfort is the salary on Month end, and no tension on Personal. Whereas In Business the profit may be more may be less, Leave may be as and when wished but their is no guarantee of bank balance A small wrong decision can ruin a long business

Taxation and Compliance Challenges

Taxation is so complex if supplier of yours( entrepreneurs) had failed to File Return on Time you will be made liable for entire dues, If there is delay in filing returns your customer will with held payment, sudden policy changes and tension of compliance and if for any case any of your large supplier registration is cancelled you might loose you entire savings

MSME Finance and Borrowing Challenges

In a Similar manner to do Business one will need Financial Support India is still a country where Interest rate is very high and above that getting loan is not easy. Though Our Government had taken imitative to help MSME with Loan without Collateral upto 10 Crore but hardly banks gives them to common man. There are policies to help MSME and online portal being developed but hardly found that Banks really give those. on the other side this is also very true that when some proper channel are accessed the loan is granted at very easy but if a business man have to pay 3-4% for such gudiance and then 10-12% ROI, CGTMSE charges it cost around 15-20% as many charges are levied upfront

The government had taken effort that loan are granted without any corruption and so many time wise business man thinks so and lodge complain if any business man do so he might be inviting his bad days

SARFAESI Act and Borrower Concerns

Whereas Government had made published good scheme Government had never informed the dangerous part a Law Called SARFAESI Act 2002 which gives an immense power to Bankers. And so when any borrower report the corruption he might be landed to the problems of this Act.

We all know that our legal system is slow but it never delivers injustice. But this act donesot comes under Ministry of Law and Justice it comes under Ministry of Finance and so a borrower should hardly expect Justice claims many lawyer.

Unnamed Borrower’s Banking Case

Recently I came to know a case of Borrower and I was surprise to note. As t here are privacy law I am not naming out the name of the Borrower or the bank, But the case needs a study and taken lesson that a borrower should never dare to lodge complain against the bankers even if there are sufficient proofs

the borrower was associated with same bank from mid 90’s and he is enjoying credit facility since then and he had paid interest equivalent to the present exposure i.e if he is having OS Rs 100 he had paid more ore less Rs 90-95 as interest

From 2022 the bankers demanded some benefit he didnot paid and he reported the same to Banks HO expecting that he would get justice. But he hardly get any justice

RBI rules specify that bank must decide loan in time frame, it should be adequte to business needs as over finance and under finance have cascading impact etc

NPA Classification and RBI Norms

His account was not renewed for 90 days and on 90th day renewal was done account was marked NPA As renewal was done it was debited by Fees and so the account became Overdrawn for first 89 days it was running out of limit and on last day it was actually fees which made the account overdrawn. In Digital system the account was technically Overdrawn for 90 days Though Policy specify that renewal should be done on time frame the bank violated and still claims that it was a fault of borrower

Bankers thought that the borrower will bow down but he did not bow down and he lodged complains. Then his group companies enjoying CC against FDR were marked NPA though RBI very clealry state that No CC against FDR should be marked NPA if there is sufficient margin Bank kept doing so

We all know that now a days Credit score is of immense importance and off and on NPA or Sub Standard reduced the score which impact the ROI this was in practice

The borrower raised further complain and thus he faced problems further

RBI Norms for Out of Order CC Accounts

As per RBI norms any CC account is treated as Out of Order if it is constantly Overdrawn for 90 days , or in case when the Outstanding Balance is less than sanction Limit but the previous 90 days credits are in sufficient to cover the interest debited in previous 90 days

RBI/DOR/2025-26/164 DOR.STR.REC.83./21.04.048/2025-26 November 28, 2025 clause 7

So in summary an account if is running Over the limit it will become NPA if it is constantly Overdrawn for 90 days and accounts which are within Limit but either no credit or insufficient credit

What Happened in This Particular Case

The bank delayed the Renewal application submitted in April 2025 The limit expired in June 2025 Renewal was done on 08.08.2025 as the limit expired the borrower did business from his current account

Interest debited on 30.09.2025 was not paid as the borrower was suffering short term payment issue as his business was impacted due to Bangladesh Tension and Tariff

On 11.11.2025 the account was marked NPA by sending a notice at after noon that there is Turnover gap

Bank informed the borrower at 3.01 PM and at end of day account was made NPA

From policy itself it is clear that NPA can only be if 90 days failure occurs either when the account is overdrawn for 90 days or is within limit neither case was there the bankers made the account NPA

MSME Corrective Action and SARFAESI Proceedings

Being A MSME it is statutory obligation of any bank that once an account is in SMA 2 Corrective Action needs to be taken if the business is viable the bank cannot make it direct NPA in this case the account was in SMA 1 i.e 30-60 days bracket bankers violated that circular of RBI too and made the account NPA on 11.11.2025 the account was marked NPA and on 12.11.2025 the bankers issued SARAFESI notice and moved the fastest way

The banker conducted successful sale of property mortgaged as it was offered at throw away price

Alleged Policy and Procedural Violations

Was any policy followed: No

What were violated : Every policy, Delay in loan consideration, Non reversal of wrong charges, GOI policy of Mandatory Committe frame for stress account bank policy of no rejection of CAP for borrower having 7 years or more relationship etc and above all a Good borrowers Account mad NPA violating RBI norms

All this was done just when the peak season was started. Now a days borrower cannot have account with other bank

Impact on Business, Property and Goodwill

Impact of this act: A 5 decade business goodwill is ruined, Business is operated by mid age partner with Senior Citizens also on responsibility

Violating all norms the property was sold In fact bankers submitted false affidavit to CJM to get he rights to throw the senior citizen out of house

SARFESI act is made to ensure that banks recovery is fast but a business man who is doing business with utmost honesty is made to suffer

DRT or higher court will surely check that the NPA was wrong and justice will come as this account was not NPA but the posters paper publication impacts business goodwill and Goodwill is biggest assest

Once a business is disturbed it would be difficult to cover that loss which occured

And in this entire case the borrower had lost property which he had earned from his savings . CC limit is taken and used for business rather then recovery from dues bank initiated direct from Collateral and as it was offered at throw away price it was sold at ease

CVC Probe and Wider Impact on Businesses

CVC probe in the case was running and in mid bank executed all this so fast to demoralize any one who dares to speak about their corruption Atkana Bhatkana latkana Culture

When this kind of cases comes to knowledge Business man advice their kids to join Job as whatever is saved will be saved for lifelong, As this business man suffered a short term problem and the problems was not in his hand many were impacted due to Bangladesh Tension in West Bengal , Many were impacted through the country due to Tariff and War GOI itself brought scheme to help MSME at that time with wrong policy application NPA was marked an entire year spent but no resolution Business account is not operational and so customer will not pay

It takes time to make a business stand but a small act of bankers can destroy everything Mental stress took life of One Partner he died of Brain Stroke

But humanity of Government officers did not awaked They kept doing this still We talk about Sanatan but hardly we respect the Sanatan Rules of not harassing any one not being dishonest to our work

Bankers are paid good By Banks but their greed causes loss to borrowers and country.

Concerns Regarding RBI Oversight

RBI is not inspecting as how a wrong SOP is made by Bank The bank is not a Private Bank its a PSU bank Head Quarters situated in Maharashtra

The bankers who caused all this are so confident that nothing will happen to them as it would take time to proof that NPA was wrong by then the borrower will loose everything and they would be promoted once or twice and the maximum will be one step demotion that too considering that it is proved, The compensation if approved will be borne by Bank and as it is a PSU bank might be the authorities doesnot impose big penalties

Government Jobs and Youth Employment Preferences

Thus this kind of approach with common man makes every common man think that Government job is much secure and every youth looks for Such job. With limited job youth get anxious. and the influezar demand that there is no government job

One have to understand that Goverment job are most secure and government cannot fire officer at ease and government is also aware as how many officer still act and so government had tried another way of no jobs as government is aware how common man is harassed but government also have limited role

We all need t understand the problem of our country if we keep harassing common man like this the Karma will come back to us

Appeal to RBI for Review of Policy Application

If official of RBI is reading my article I request them to relook as how the policy is wrongly applied

Being A real Sanatani is to help common man and all citizen not to be dishonest to own assignment.