SBI encashes widow’s FD to recover husband’s loan, Allahabad High Court orders refund

In a recent ruling, the Allahabad High Court has ordered the State Bank of India (SBI) to return Rs 19.90 lakh that it had withdrawn from a woman's fixed deposit account to recover a loan taken by her deceased husband. The court ruled that SBI had no legal basis to debit the woman's account, as she had no contractual relationship with the bank.

The high court also imposed a fine of Rs 1 lakh on SBI as exemplary and punitive compensation for its actions. The court expressed concern over the bank's haphazard manner of dealing with the woman's account, stating that the bank's actions were mala fide and not in line with the due process of law in India.

The petitioner's husband had taken a loan of Rs 15 lakh from SBI, which later led to his demise due to Covid-19. The woman, who was neither a signatory nor a co-borrower, had claimed Rs 25 lakh for the mental anguish caused by the bank's actions. However, the court decided that an amount of Rs 1 lakh would be appropriate, taking into account the circumstances surrounding the case.

The court directed SBI to refund the entire Rs 19.90 lakh along with interest at the fixed-deposit rate that the woman had been receiving. The bank's conduct has been deemed abominable and contrary to banking practices, with the court emphasizing that such actions cannot be justified under any circumstances.