Consumer Commission Slaps Canara Bank with ₹60,000 Penalty for Service Lapses
The District Consumer Disputes Redressal Commission-II in Visakhapatnam has delivered a significant verdict, ordering Canara Bank (formerly Syndicate Bank) to pay a total of ₹60,000 in compensation and legal costs to a customer for deficiency in service, unfair trade practices, and causing mental agony. This ruling highlights the critical importance of transparency and accountability in banking operations.
Details of the Housing Loan Dispute
Complainant MVS Pavan Kumar had secured a ₹20-lakh housing loan in 2016 from the bank's Naiduthota branch in Vizag. The loan featured a 20-year repayment period with a floating interest rate. Initially, his Equated Monthly Installment (EMI) was set at ₹18,880, which he later requested to be increased to ₹20,000. Payments were consistently deducted via Electronic Clearing Service (ECS) from his HDFC salary account.
In October 2018, Kumar made an additional payment of ₹1 lakh, explicitly requesting that it be adjusted against the principal amount. However, the bank deposited this sum into an "advance account" without notifying the customer. Following his resignation from employment in December 2019, the ECS deductions ceased. Kumar then paid EMIs in cash for three months before arranging for deductions from his Canara Bank savings account.
Discovery of Irregularities and Bank's Response
Upon verification in August 2020, Kumar discovered that the excess EMIs and the ₹1 lakh payment had not been applied to reduce the principal. Instead, the funds were held in a separate account without accruing any interest. Despite repeated requests for correction, the bank failed to address the issue and even classified him as a defaulter for three months, exacerbating his distress.
The bank contested the allegations, asserting that all payments were properly accounted for and had proportionately reduced the outstanding loan balance. However, the commission found the bank's actions constituted clear deficiency in service and unfair trade practice, leading to unnecessary mental agony for the customer.
Commission's Directives and Broader Implications
The commission has mandated Canara Bank to provide a certified recalculated statement, treating the ₹1 lakh and excess EMIs as principal reductions. The bank must adjust the loan account accordingly or refund the amount with 6% interest from October 2018 to September 2020. Additionally, the bank is required to pay ₹50,000 as compensation for the hardship caused and ₹10,000 towards legal expenses incurred by Kumar.
This decision serves as a powerful reminder of consumer rights in financial transactions and underscores the obligation of banks to maintain transparency and ethical practices. It reinforces the legal recourse available to customers facing similar issues with financial institutions.
