Section 13-2 notice without classifying accounts as n.p.a

1) The Bank can not issue notice U/S 13(2) of Sarfaesi Act  without declaring the account as N.P.A.

2) Even an operational account can be declared as NPA if other conditions are satisfied .

3)Please note the interest has to be reversed after declaring the account as NPA and not before that.

4) The moratorium period has to be considered strictly as per terms of Sanction duly agreed by you.

5)If the moratorium period has not been specifically mentioned that shall mean there is no moratorium period.

You have got every right to force fully raise your objections to the notice served.

Hi Aman,

Firstly the Bank can not issue a notice under section 13-2, without declaring your account as NPA.

Secondly, rest of the quyiries depends upon the on Loan application and the Loan sanctioning letter,which will be consisting of terms and conditions. 

Please mail me, all your documents to me,so that i can clarify your doubts.

srishaila,advocate,bangalore,sdharani120@gmail.com,9741425514

Normally Bank issues, when ever they find signals of sickness and symptoms of becoming an NPA surfaces.  It is a regular feature, as Bank is more concerned about profitability and it is not the customer, and it is ultimately the Bank that is going to suffer because of NPA's, as they can not debit interest, and increasing NPAs and dwindling profits speaks  of   inefficiency and bad control of accounts.

It is time for you to record all happenings and address a letter explaining your difficulties and co-operate  with the Bank in the interests of your own business, as you have to continue your business, and  NPA may adversely affect your credibility ( credit rating) and also may involve problems to Guarantors.

Ask your conscience if you stand in their position and if you fail to receive payments due to you from others, what will be your reaction?   A customer should establish a long standing relationship, and  meet the Banker and solve out the issue once for all either through rephasing or by offering additional security or the manner in which your bank suggests.

1. Bank can not issue Demand Notice u/s 13(2) of SARFAESI Act, 2002 against any loan account  with out classifying the said account as NPA. Even operational accounts can be classified as NPA on certain conditions as per RBI Guidelines,

2. The conditions mentioned in the Sanction letter needs to be complied with by the Bank & moratorium period is one such condition.  So, if there is moratorium period mentioned in the Sanction ;Letter, then the Bank has to allow the said moratorium period, otherwise not,

3. Send your representation u/s13 (3-A) of the Act within the 45 days from the ate of the Demand Notice.

Thanks everyone for your valuable feedback..appreciated

Over here, the scenario is quite different. The bank had sent us section 13-2 notice and the interest is being levied on the accounts for which notice had been sent till date. Even, in the statement of accounts, the amount can be seen being credited!

1) The bank had even kept F.D.R's (20% of total sanction amount) for which they are giving us 8% interest per annum and charging around 13.5% till date on the same amount which has accrued large sum of excess amount gone towards bank. Can we also take this matter in representations as I have incurred several outflows due to this ?

2) Is the account still operational after being declared N.P.A or is the amount being deposited thereon, gone in non-lien account instead ?

3) How can we handle such matter if the bank had agreed on table which I am assuming is O.T.S and they have even pledged our f.d.r in full to settle some portion of repayments which has already been done and can be seen in statement of accounts but they are not willing to give achnowledgement for same in writing (settlement) . Instead, Have refused re-schedulement of accounts in reply to our representation 

Regards

Thanks everyone for your valuable feedback..appreciated

Over here, the scenario is quite different. The bank had sent us section 13-2 notice and the interest is being levied on the accounts for which notice had been sent till date. Even, in the statement of accounts, the amount can be seen being credited!

1) The bank had even kept F.D.R's (20% of total sanction amount) for which they are giving us 8% interest per annum and charging around 13.5% till date on the same amount which has accrued large sum of excess amount gone towards bank. Can we also take this matter in representations as I have incurred several outflows due to this ?

2) Is the account still operational after being declared N.P.A or is the amount being deposited thereon, gone in non-lien account instead ?

3) How can we handle such matter if the bank had agreed on table which I am assuming is O.T.S and they have even pledged our f.d.r in full to settle some portion of repayments which has already been done and can be seen in statement of accounts but they are not willing to give achnowledgement for same in writing (settlement) . Instead, Have refused re-schedulement of accounts in reply to our representation 

Regards

1. Due to CBS system any body can deposit any amount from any Branch to the said NPA account. So, it can not be called irregular on the part of the Bank to show such credit in the statement of accounts,

2. Keepig the FD as additional security was decided before providing and accepting the terms of the said loan. So, it can not be agitated now,

3. No, the said amount deposited after the account has become NPA will not be kept in no lien account by the Bank,

4. Bank will not give any thing in writing about the settlement offer which they will accept. You shall have to ask them about the said amount and offer them the same in writing in your settlement proposal which they will accept, 

Classification of an account is absolutely necessary  for issuance of notice  under section 13 (2) of the Securitisation Act.

No notice can be issued in case of an account is not a non performing asset. In the event a notice under section 13 (2) is issued where the account is not classified as a non performing asset is bad in law and the same is illegal.

Though it is against norms to issue such notice before account becoming NPA, Banks's instill a fear among borrowers do resort to such unethical practices, as a format is ready in their files.  Forget about the notice.

I agree to differ with the opinion that deposits made subsequent to advance can not be under lien.  Bank's generally obtain (it is form No.1 in certain banks, called a general lien letter which states that amount already borrowed or borrowed from time to time is subject to that lien.  Further the deposit may be in the name of promotor or guarantor.

Banks' do resort to such practice of increasing liabilities and assets to boost the turnover, and once you have willingly deposited, you may if you want can ask them to adjust the deposit towards such loan repayments. I am not going to comment on what is ethical and unethical as Bank's should not have demanded such deposit, and borrower willingly deposited that amount wished to raise issue now, after getting a benefit after a mutually understanding agreement.

The issue is how to solve the problem and not to attach each other.  When all Bank's in a bid to arrest the growth of alarming issue of escalating NPA's, generally they extend needed co-operation and needed requests (you may call them as demand, as once funds are lent banker is always at mercy of borrower).  Have a mutual discussion and sort out the issue amicably as give and take policy is always advisable with Bank to have good credit rating and reputation in society.

Thank you once again everyone for your valuable suggestions 

two more queries --

1) how do we get to know with firm mind if the a/c is classified N.P.A or not?

2) can cash credit limit have rate of interest changeover in par with what is agreed in sanction letter at later stage 

regards

1.You have to ask your Banker either over phone or through personal visit and even ask them How they could issue notice without classifying the account as NPA, since the date the account was classified as NPA, what type of NPA (Substandard Asset, Doubteful asset, Loss Asset)

2.The rates are linked to Prime Lending rate which depends on market fluctuations and RBI directives and the agreement clause stipulates that the rate of interest depends from time to time on PLR

/RBIdirectives.

It appears that there was never any interaction with your Banker so far, as these things can be eased out with personal discussions with your Bank officer and are simple. 

Thank you..Mr.Prasad for the response

There have been several interactions with the bankers and yes, as per discussions with them over phone, I got quite sure that the a/c havent been classified N.P.A because he informed me to deposit XX amount and they will plunge F.D.R in similar account immediately but this had to be done before 31st march or the account would be deemed N.P.A. as per his words. We had recieved lot of calls for this settlement. 

2) The a/c is completely operational

3) The interest is being imposed till date on the similar a/c and they had informed that interest being imposed will still be done on regular basis in future also

Regards

Please post exactly what is your problem with Bank ?

(first you have stated that your account is not NPA and replies were given that Bank is not justified in giving such notice.  Now you say that you are aware of the fact that your account has become NPA.

Debiting of interest and accounting that received interest as income in books of Bank are different aspects.

The endeavor should be to place facts and seek information and to resolve differences.All the posts you have made shows a finger to the Bank, and though several meetings have been attended, you are not coming out with facts of actual cause for classifying your account as NPA.

Operations are different.  It is important as to whether the  borrower is entirely using that account for his entire business transactions, and sales shown in Balance sheet are reflected atleast partially in credits to the account, and suppliers are  being given cheques of the Bank with whom financial facilities are availed.

As far as I know, no borrower transacts with  a bank, after knowing the Asset classification with a fear that amounts credit may be appropriated to loan account, and always conducts major transactions through a different Bank.  Please come out with facts as to exact reasons for deterioration of the asset and reasons for classifying the asset as Sub-standard.

Sufficiently advised by experts above, nothing more to add.