subject: Beware! Banks has the Right to Deduct Money from your Account [print this page] Beware! Banks has the Right to Deduct Money from your Account
Did you know that banks can hold your money hostage? Well, they can, and the ransom you have to pay to get your money back: clear all outstanding dues. Banks have devised a clever way of ensuring that customers clear credit card dues and repay loans on time. If you default for several months, the bank can deduct money from your savings accounts or refuse to pay money from the fixed deposit when it matures.
No, banks aren't trying to con you. What they are doing is perfectly legal. In fact, they have your permission to do so. You don't remember giving it, do you? But you did when you signed on the dotted line while availing of the loan or the credit card and accepted the terms and conditions (T&C).
The fine print will have a statement similar to this: "I hereby grant and confirm the existence of the right of lien and set-off with the Bank, which it may use anytime to utilise any money belonging to me and deposited with the bank, towards any outstanding dues".
All this legalese simply means that the bank has the right to deduct money from your account. "Any collateral that the bank can legitimately hold can be held back. Even FDs can be used," says Harsh Roongta, CEO, Apnapaisa.com. Of course, if your T&C does not state this, the bank cannot touch your money.
Says Kishori Udeshi, chairman of the Banking Codes and Standards Board of India that lays down the code of conduct for bankers: "Banks can't debit unless you agreed that such measure can be taken while taking a loan. However, if you have signed on the loan contract and it mentions that the assets can be adjusted, then they can."
So, if you aren't careful about clearing all your dues with the bank, you might find yourself bankrupt, literally, as Ashish Jha (name changed) discovered last year. For the Mumbai-based script writer, 2010 began with a financial blow. He had outstanding dues of Rs 90,000 on his credit card and had lost his job.
In April, he asked a friend to lend him some money, who transferred it to Jha's account. When Jha went to withdraw the money, he found that the bank had deducted the whole amount as payment towards the credit card dues. A few months later, Jha deposited a cheque of Rs 35,000 in the bank that he received as payment for writing assignments. This too was appropriated by the bank.
If you think you can avoid such a situation by opening a second account, you still won't be able to get away. You can't default on one account and get away by keeping to the straight and narrow on the other. Take the case of Sumit Shah (name changed), who had taken a loan against gold from Canara Bank .
Even when he repaid the entire loan, he could not get the jewellery back as he was defaulting on a different loan that he had taken from another branch of the bank. Similarly, Charan Singh Guha too had to lose out on his savings. When Punjab National Bank withdrew money from his account, the banking ombudsman upheld the bank's right to do so as Guha was the guarantor of a loan that had not been repaid by the borrower.
