(a) whether the Government has any proposal to enact legislation on lender`s liability;
(b) if so, the details thereof indicating the present fair practices code for lender`s
liability;
(c) whether a case on the validity on the Securitisation Act, 2002 is pending before
the Supreme Court; and
(d) if so, the present status of the case?
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ANANDRAO VITHOBA ADSUL):
(a) At present this is not under consideration.
(b) RBI has issued guidelines on fair practices codes for lenders to all schedule commercial
banks/All India financial institutions which inter-alia include the following:
# Banks and Financial Institutions should acknowledge receipt of all loan applications.
The acknowledgement slip should indicate the time frame within which loan applications up
to Rs. Two lakh would be disposed off.
# Banks/Financial Institutions should verify the loan applications within a reasonable
period of time if additional details/documents are required, they should immediately intimate
the borrowers.
# If loan applications of small borrowers seeking loans up to Rs. Two lakh have been
rejected by banks/FIs, they should convey in writing to the applicant the main reason/reasons
which led to reaction of the application within the stipulated time.
# Banks/FIs should ensure that credit applications are properly assessed by borrowers.
They should not use margin and security stipulation as a substitute for due diligence on
creditworthiness of the borrower.
# Banks/FIs should convey to the borrower the credit limit along with the terms and
keep on record the borrower`s acceptance of these terms and conditions.
# Post disbursement supervision by banks/FIs, particularly in respect of loans upto
Rs. two lakh, shouid be constructive with a view to taking care of any lender-related genuine
difficulty that the borrower may face.
# Before taking a decision to recall/accelerate payment or performance under the
agreement or seeking additional securities, lenders should give notice to borrowers, as
specified in the loan agreement or a reasonable period, if no such condition exist in the
loan agreement.
# Banks/FIs should release all securities on receiving payment of loan or realization of
loan subject to any legitimate right or lien for any other claim they may have against the
borrower. Borrowers should be given notice if any right of set off is to be exercised,
with full particulars about the remaining claims and the documents under which lenders are
entitled to retain the securities til! the claim is settled/paid.
(c) Yes, Sir.
(d) The case is being heard by a constitutional bench in the Supreme Court.