ISLAMABAD: President Dr Arif Alvi on Tuesday upheld a decision by Banking Mohtasib of Pakistan ordering the Bank of Punjab (BoP) to repay Rs423,556 to the family of a deceased borrower whom the bank had “unilaterally and unfairly” recovered from his family .
The president pointed out that the bank had unnecessarily complicated a routine matter, as its own standard operating procedures allowed it to grant aid in such cases.
Mian Allah Wasaya had benefited from a loan of 3 million rupees in 2015 from Bank of Punjab and deposited Certificates of Regular Income (RIC) issued by the Central Board of National Savings, worth 3, 5 million rupees, as cash collateral with the bank.
On January 27, 2017, Allah Wasaya passed away and the bank alone collected the RICs worth Rs. the time of his death was only Rs57,294.
Bank accused of recovering margin beyond Rs57,294 without justification
Allah Wasaya’s widow (the complainant) asked the bank to charge a surcharge up to the period that her husband was alive and to waive the surcharge thereafter.
However, the bank did not accede to her request, after which she turned to the banking ombudsman.
After hearing the case and reviewing the available record, the banking ombudsman noted that at the time of Allah Wasaya’s death, the principal amount outstanding was Rs. 2.889 million and the accrued surcharge was only Rs. 57,294. .
In the given circumstances, it was the fiduciary responsibility of the bank to guide the legal heirs for the adjustment of the outstanding debt at this level against the collection of the RICs, observed the mediator.
The ombudsman noted that instead of exercising its legal obligation to offset the loan with cash collateral, the bank continued to dwell on collection and unnecessarily racked up a markup on the outstanding principal, which was unfair. as directed by the State Bank of Pakistan.
The ombudsman said the bank’s assertion that the matter related to the year 2018 and that its books had been closed and therefore was unable to provide financial assistance was ” absurd” and “unprofessional”.
The ombudsman added that no rules, regulations, laws or accounting standards were mentioned that prohibited the bank from re-examining old/closed business and that these types of transactions were a routine affair.
The banking ombudsman found that unilaterally charging and recovering an unjustified surcharge beyond Rs57,294 was an injustice to the family of the deceased borrower.
The Ombudsman observed that the bank had committed maladministration and professional misconduct by failing to exercise its rights without good cause, even though it held fully cashable cash collateral under the loan agreement documents and that it had unnecessarily accumulated mark-up obligations.
The bank subsequently lodged a complaint against the ombudsman’s decision with the president.
President Alvi upheld the ombudsman’s decision and found that the bank had provided no justification for rescinding the ombudsman’s original order.
“The representation is dismissed as being without merit and the bank has failed to meet its legal burden and responsibility under the law,” the president noted in his decision.
Posted in Dawn, March 2, 2022