If one were to analyse the complaints filed before the banking ombudsmen, a large percentage of them pertain to credit facilities or loans given or not given by banks. Consumer courts may not have had so many complaints on this particular topic in the past, but in recent years, there have been a considerable number of cases. And the complaints range from refusal to grant a loan to inordinate delay in taking a decision and releasing only part of the sanctioned loan amount.

In the initial years, consumer courts did not entertain complaints pertaining to loans. Subsequently, there was a slight change in the way the courts looked at loans. In the case of the Branch Manager, State Bank of India and Ors vs Sunderlal Kela (R.P. No 267 of 1994), for example, the National Consumer Disputes Redressal Commission said it was for the bank to decide whether a particular party was eligible for the grant of credit within the framework of the credit policy laid down by the government of India and the Reserve Bank of India.

However, if there was any evidence of abuse of exercise of their authority for giving credit by the bank or financial institutions, then the consumer courts could grant relief to a consumer.

In the case of Mike’s(P) Ltd vs State bank of Bikaner and Jaipur (original petition no 139 of 1992), where the complainant, a garment exporter, could not execute the orders received from foreign buyers and was eventually financially ruined because of the bank’s failure to honour its credit commitment, the National Commission awarded a compensation of Rs 10 lakh.

In the case of Viswalakshmi Sasidharan and Ors vs the Branch Manager, Syndicate Bank, Belgaum (SLP no 4077 of 1997), the Supreme Court made it clear that if a person suffered loss on account of the failure of a bank to disburse the loan amount as contracted, it would give the consumer the right to complain of deficiency and seek redress under the Consumer Protection Act.

Then in 2004, in the case of Aquadev India Ltd vs State Bank of Hyderabad and others, where a consortium of banks promised the loan, asked the consumer to go ahead with his project and then after two years withdrew the offer, the apex consumer court held that even though the banks were entitled to repudiate the contract (for the loan) for justifiable reasons, the delay in taking such a decision thereby causing the consumer loss, constituted deficiency in service.