The National Consumer Dispute Redressal Commission has directed the State Bank of India (SBI) and New India Insurance Company to waive off the remaining loan amount of ₹14,30,756, borrowed by a deceased Pune-based consumer in 2007 for purchasing a home. The decision comes after the bank failed to inform the consumer about the discontinuation of the insurance policy, which had been offered as a complementary benefit to cover the loan. Instead, the bank continued to demand loan repayments from the customer.
The deceased consumer, Navnath Vaidya, had taken the loan in 2007, with the insurance policy providing personal accident coverage for the loan amount. However, the bank discontinued the policy in 2013 without informing him. In 2015, Navnath met with a fatal accident, and his widow, Sheetal Vaidya, approached the bank to waive off the loan against the insurance policy. To her shock, the bank informed her that the insurance had been discontinued two years prior, and she was required to clear the loan installments.
Despite repeated requests for a waiver, the bank insisted on repayment. Aggrieved by this, Sheetal filed a complaint with the Pune District Consumer Commission. However, in 2018, the district commission dismissed her claim, stating that she was not a consumer as the policy was not independently purchased but offered as a complementary benefit by the bank. The commission further argued that since no premium was paid for the policy, it was outside the purview of the Consumer Forum.
Aggrieved with the district commission’s decision, Sheetal filed an appeal before the State Consumer Commission in Mumbai and subsequently to the National Consumer Dispute Redressal Commission, which ruled in her favor.
Sheetal’s advocate, Ashok Gade, explained, “We fought the case on its merits, relying on a judgment in the case of State Bank of India v. Surisetty Lakshmi Sai Mahalakshmamma, which was similar to ours.”
Advocate Gade further highlighted that the bank claimed to have issued notifications about the policy discontinuation on its website and notice boards, but both the state and national commissions rejected this defense.
The State Commission noted:
“In this case, the free personal accident insurance cover was withdrawn by the bank on 01/07/2013. However, no personal notice was issued to the complainant’s husband about the discontinuation. As a result, neither the complainant nor her husband was aware of the policy being discontinued. This constitutes a deficiency in service.”
Upholding the State Commission’s decision, the National Commission observed:
“As the insurance policy was an integral part of the loan agreement, and even though no premium was charged, the interest paid on the loan serves as consideration for the policy. Therefore, the bank’s failure to notify the insured personally about the policy’s discontinuation amounts to a deficiency in service.”
The National Commission ordered the bank and the insurance company to:
1. Waive off the remaining loan amount.
2. Refund three installments deducted from the complainant’s account after her husband’s death, along with 9% annual interest from the date of deduction until realization.
3. Pay ₹50,000 for mental agony and an additional ₹25,000 towards litigation costs.
