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Beyond the Balance Sheet: Supreme Court Questions Banks on Corporate Lending Doldrums
In a judgment that resonates far beyond the immediate parties, the has once again trained its lens on the institutional practices of the Indian banking sector. While adjudicating a plea from M/S Bhaskar International Private Limited seeking to stall by the , the bench comprising Justice Ahsanuddin Amanullah and Justice R. Mahadevan delivered a stinging rebuke against the casual approach often adopted by banks when sanctioning high-value corporate loans.
A Case of Default and Displeasure
The dispute originated from a Rs 8.09 crore loan facility granted to the petitioner company in . Within months, the account devolved into a (NPA). Years of default led the SBI to invoke , seeking physical possession of the company’s properties. After the upheld the recovery process, the petitioner moved to the Supreme Court.
The petitioner argued that declaring the account an NPA was arbitrary, claiming the unit remained viable if granted further assistance. Conversely, the SBI emphasized the glaring lack of fiscal discipline exhibited by the company, noting that not a single installment had been repaid since the inception of the loan.
The Court’s Scrutiny: "Casual" Lending vs. "Stringent" Recovery
While the Supreme Court ultimately sided with the bank—dismissing the petitioner’s plea and emphasizing the borrower's unacceptable conduct—the Court’s reasoning signaled a shift in its judicial stance toward bank management.
Observing that the bank failed to conduct a robust assessment of the borrower's repayment capacity, the Court noted:
"This is a clear indicator that a proper assessment was not made of the capacity of the borrower to repay the loan by the concerned officials of SBI."
Key Observations
The Court’s comments, which have sparked conversation in legal and financial circles, framed the broader issue of credit disparity:
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On Corporate vs. Individual Lending:
"It is coming to the notice of the Court that the banks in general, including respondent no.1-SBI is casual in granting loans of huge amounts to bigger entities but at the same time, very demanding apropos small loans where ordinary people come for personal requirement(s)."
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On Systematic Harassment:
The Court noted that in the small loan segment, banks often subject citizens to
"more stringent conditions and a tedious process, which may amount to, in certain cases, borderline harassment."
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On Institutional Responsibility:
"Whilst recording our displeasure at such workings, we leave it for a more fit case where specific orders may be called for against such practices of the banks in general."
A Narrow Window for Redress
While refusing to halt the recovery, the Supreme Court provided a "final opportunity" to the petitioners. The Court granted a two-week on the subject properties to allow the company to approach the for , ensuring without prejudicing the Bank’s right to recover its dues.
Implications for the Banking Sector
This order serves as a stern reminder that while the Court will strictly uphold the recovery mechanisms provided under the to protect the banking system, it will not remain silent on the systemic lapses in . The judiciary has effectively placed the burden on banks to frame policies—guided by norms—that are not only robust in ensuring repayment but also equitable in their treatment of loan seekers across the economic spectrum.
By passing the observations to the SBI’s legal counsel, the Court has invited the banking institution to introspect on whether its internal processes reflect the responsibility expected of a major financial intermediary.
