Loan defaulters will now find it difficult to rid themselves of all their liabilities through the one-time settlement scheme. Public sector lenders plan to insert a clause that will bar them from withdrawing criminal cases against private persons, irrespective of a settlement.

The decision was taken recently at a meeting of 10 bank chiefs with officials from the Reserve Bank of India Central Vigilance Commission and the Central Bureau of Investigation. The clause was deemed necessary in light of the recent increase in cases of fraud.

Officials who attended the meeting told the move was initiated as several loopholes were noticed in the OTS scheme. It was also found that there was no uniform policy across banks for the amount on whicha settlement could be made.

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Public sector banks often resort to OTS schemes with borrowers to recover a part of the outstanding amount and minimise the losses on account of non-performing assets.

It was noticed that, in the recent past, banks had gone in for an OTS scheme multiple times with the same borrower for the same or less than the settlement money received earlier.

“Banks have to rely on collaterals (as the underlying asset) for OTS schemes as primary securities are not available by the time the fraud surfaces. Instructions were issued for the OTS scheme and sharing of information on theborrower’s accounts among the multiple financing banks,” a bank executive said.

It was also observed that securities are distress-valued and, even if the value of the collateral is more than the loan outstanding, settlement is done on a lesser amount. In addition, CBI officials pointed out that there was a high degree of under-reporting of frauds by banks.

According to RBI data, out of the 44 cases of frauds of Rs 1 crore (Rs 10 million) or more, 33 cases were not reported by banks. “Banks reported there is hesitation on the part of CBI to take up cases of frauds involving over Rs 1 crore (Rs 10 million),” the Central Vigilance Commissioner said.

According to RBI data, during 2008-2009, public sector banks reported 3,425 frauds as against 3,004 in the previous year, representing an increase of 14 per cent.

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0 responses to “One-time settlement scheme will not absolve Loan defaulters from criminal prosecution”

  1. Daniel Rosario says:

    Dear Sir,
    Due to my business collapse, I have become a defaulter for my home loan. In the year 2008 Dec, I received a notice from my banker to settle the dues of Rs 600000/-. The outstanding amount was Rs336000/- when my account was declared NPA. After 2008 notice I have deposited Rs 540000/-, but still the bank sends me a notice to pay Rs.600000/- and threaten me that they would take further action and take possession of my flat. I have repeatedly requesting them to provide me with a statement of account which is always turned down for nearly 10 times and they are not giving me a uptodate statement of account and nor do they entertain me and answer my letters.
    Please help, if you can.
    Thanks,
    Regards,

  2. Mahesh Desai says:

    Need some more information on the subject matter particularly 2nd last para.

    • Daniel Rosario says:

      I did not understand regarding what exact information do you need. Please let me know about it so that I can explain appropriately.

      • Daniel Rosario says:

        Dear Sir,
        Due to my business collapse, I have become a defaulter for my home loan.

        In the year 2008 Dec, I received a notice from my banker to settle the dues of Rs 600000/-. where as the outstanding amount was Rs336000/- when my account was declared NPA. in the year 2005.

        After 2008 notice, I have deposited Rs 540000/- till date, but still the bank sends me a notice to pay Rs.600000/- and threaten me that they would go ahead and take further action and take possession of my flat. I have repeatedly requesting them to provide me with a statement of account which has been always turned down for nearly 10 times and they are not giving me a uptodate statement of account and nor do they entertain me and answer my letters.

        Please help, if you can.
        Thanks,
        Regards,

        Reply

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