An attempt to recover a mere ₹590 in penalty charges on a closed car loan has proved costly for one of India’s largest public sector banks. In a significant consumer rights ruling, a district consumer commission in Punjab found that despite the borrower having fully repaid his loan and receiving a formal No Objection Certificate (NOC), the bank continued presenting EMI recovery requests against his account. Holding the bank guilty of deficiency in service, negligence, and unfair trade practices, the commission directed it to pay ₹1 lakh as compensation, ₹10,000 towards litigation costs, and refund the wrongly imposed ₹590 charge.
The case was filed by Punjab resident Sanjeev Kumar Nayyar, who had availed a car loan of ₹2 lakh in 2021. Under the loan agreement, he was required to pay a monthly EMI of ₹4,100. Records showed that he regularly paid all installments and cleared the entire outstanding amount on November 10, 2025. Following settlement of the loan, the bank officially closed the account and issued a duly signed and stamped NOC on the same date.
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Ghost NACH Recoveries After Loan Closure
However, the matter did not end there. According to the complainant, the bank attempted to recover EMIs again in December 2025 and January 2026. On both occasions, the amounts were subsequently reversed after he raised objections and bank officials assured him that the issue had been resolved.
Despite those assurances, the problem persisted. On January 20, 2026, the bank once again presented a National Automated Clearing House (NACH) mandate for EMI recovery, even though the loan account had already been closed. As there were insufficient funds in the account at the time, the transaction failed, resulting in a penalty of ₹590 being levied against the complainant as bounce charges.
Deficiency in Service Leads to Punitive Penalties
The borrower challenged the charge, arguing that the recovery attempt itself was unlawful because the loan had already been settled months earlier. In February 2026, he served a legal notice seeking a refund of the penalty amount and compensation for the inconvenience and mental harassment caused by the bank’s actions. According to the complaint, the notice did not receive a satisfactory response, prompting him to approach the consumer commission.
After examining the loan closure records, account statements, and other evidence, the commission concluded that the loan account had indeed been closed in November 2025. It observed that repeated attempts to recover EMIs after closure of the account clearly reflected negligence on the part of the bank.
Commission Orders Urgent CIBIL Correction
The commission noted that the complainant suffered not only financial loss but also mental stress, inconvenience, and unnecessary expenditure of time due to repeated visits and follow-ups with the bank. It further observed that the wrongful recovery attempts exposed the complainant to the risk of damage to his credit history and CIBIL score, creating additional anxiety and uncertainty.
Accordingly, the consumer body directed the bank to refund the ₹590 bounce charge, pay ₹1 lakh as compensation for mental agony and inconvenience, and provide ₹10,000 towards litigation expenses within 45 days. It also ordered the bank to immediately rectify the complainant’s CIBIL record if it had been adversely affected by the wrongful recovery attempts.
