Many borrowers, who are unable to repay their loans due to the financial crunch, have seen their savings account balances turn negative. Lenders have been regularly sending auto debit requests to bank accounts of borrowers who are in financial hardship and are unable to repay.
When requests bounce due to insufficient balances, banks levy a charge of Rs. 250 to 500. The penalty is lower in public sector banks and higher in private sector banks. For many borrowers who are unable to repay their loans, such charges have been mounting and their balances have turned negative.Due to negative balances, many borrowers have stopped using their bank accounts.What happens to such accounts when the balance turns negative? As per our internal policies, we may close the account and write-off the amount, said Ravi Narayanan, president, head – branch banking, retail liabilities and products,Axis Bank, said in a recent media interaction. Such accounts may not be termed as inactive or dormant after one year, like it usually happens. According to Reserve Bank of India’s regulations, for an account to be termed inactive or dormant, there shouldn’t be any debt or credit transactions. If there is a mandate attached to such accounts, banks have to act based on their internal policies.
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