Is publishing photos of home loan defaulters correct?

Some lenders are publishing photos of home loan defaulters, that too when the home is mortgaged with them and the borrower is reported to credit bureaus which ensures that he or she would not get funding from any legal sources

Several banks are publishing photos of borrowers who have defaulted. Every day there are advertisements by banks to dispose off properties of people who have taken a loan and could not repay in time. While banks have been publishing photos of corporate borrowers, who had defaulted, several lenders have now started publishing photos of home loan defaulters as well. There is a difference between a borrower who had taken loan for buying a home and other borrowers who got a loan for business purpose.
The question is—is it morally right on the part of the banks to publish photos of home loan defaulters. The recovery is being undertaken under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI Act). This Act was enacted presumably on the lines of the Article 9 of US Uniform Commercial Code (UCC). The Act is, actually, nowhere even close to that Code. In fact, UCC deals with personal property and not real estate, and therefore, home loans are not at all covered by US UCC Article 9. The Act was recommended before the Parliament as one which would help reduce the burden of bank NPAs (non-performing assets). The picture one got was those so-called ‘wilful’ defaulters who habitually over-borrow from banks, siphon off the money, possibly even before the loan repayment starts, and enjoy life at the cost of banks. In other words, the objective was to be stern against promoters of companies that go sick while promoters enjoy the pink of their own health. Little did the parliamentarians who passed the law realise that the law will be used, as it is being done, vehemently to drag home loan borrowers out of their homes. 
No one contends that a borrower should be allowed to go scot free after having borrowed money from a bank or housing finance company, even if it was purchase of a residential house. But is a default of a home loan a case of wilful default that was in the minds of the lawmakers when the SARFAESI Act was enacted? Is it difficult to envisage that there may be zillion reasons for which a borrower may be forced to default on loan EMIs (equated monthly instalments)? Once again, financial discipline is important, and it is a settled fact that home borrowers who are unable to pay their EMIs have to suffer foreclosure at some stage. There are hundreds of thousands of such homes under foreclosure action in the US today, and therefore, no one should shed tears if borrowers have to face a mortgage foreclosure on account of default of a home loan.
But then, the SARFAESI Act puts a non-judicial route to mortgage foreclosures. The way the section is worded, a home borrower will first have to lose the roof over his head before he can run to his lawyer to take an action in a DRT (debt recovery tribunal). One just needs to take a practical stock of the situation—a person having a salary income of Rs30,000 per month takes a loan that has an EMI of Rs10,000 per month. The ratio works perfectly fine since a debt to income ratio of 33% is one of the best a lender can expect. Also, given that a household can easily manage living costs within a range of Rs10-Rs15k per month, there is sufficient scope for the individual to pay his home loan without default. Now, say, he loses his job. It obviously will take a few months before he can get a replacement job, particularly in a market as the present one. So, three EMIs missing, and the bank classifies the loan as a NPA. The bank sends a loan recall notice, demanding not just three EMIs, but the whole of the loan. And in the meantime, the bank starts adding penal interest, which is much higher than the loan interest rate. 
The issue is, where does the individual, out of job and facing his own worries in life trying to find a new job, get the money from, to pay the bank? Not just the EMIs, but the lethal penal interest rate too. So, as would always happen—debt begets debt. He would possibly run to a usurious lender, and borrow at excessive interests to pay the bank off, but sooner or later, will get into a default at both the places.
Here comes the bank with a SARFSAESI notice—pay off the entire loan, along with penal interest and all other charges within 60 days, or face repossession. 
The tragedy is that the individual can run to no one for rescue. He would often run with a pleading face to the branch manager, but the manager would say—the matter is out of control now. 
Now think of remedies available. Is it unlikely that the borrower may have questioned the very claim of the bank? Is it unlikely that the bank might have added wrongful costs or charges which the individual may be disputing? Thanks to the Supreme Court ruling in Mardia Chemicals, the law gives the borrower a right of representation, but the right of representation is a mere lip-service, as the representation goes to the very bank or bank manager with whom the borrower has an issue. The law does not even require the borrower’s grievance to be handled by a senior office which can examine the matter dispassionately. Invariably, if at all the borrower makes a representation the answer from the bank is going to be mechanical—turning down the representation with a stereotyped rebuttal of whatever the borrower might have said.
So, can the borrower approach his lawyer and seek a redressal? Unfortunately, as the law seems to say, the borrower must first allow the bank to take action (read, take away the borrower’s house) and go for redressal before a DRT. DRT action may stretch for months together. To add to the injury, the DRT may also pass an order for pre-deposit of a large part of the amount demanded by the bank before the application can proceed. The irony is—if the borrower had the money to pre-deposit, why would he let the loan default anyways? But law is merciless, regardless, and concern-less.
Banks are also publishing photos of corporate loan defaulters. Almost every day you would find ads with names and photos of small time firms, traders, owners of SMEs and so on.

Banks are adding insult to the injury by publishing the borrowers’ photographs in the newspapers. This is simply outrageous. The matter was discussed in a Madras High Court ruling where the high court affirmed of the practice, but the issue was mainly on the grounds of borrowers’ privacy rights, bank secrecy laws, and so on. Our courts have still not got rid of the mindset that when a borrower defaults, he is not necessarily defaulting because he is not wanting to pay, but because he is unable to pay. Also, over the decades of the way the banking system has worked, courts are simply unable to appreciate the miseries of the retail borrower failing to pay a consumer loan. Therefore, it is a little surprise that the Madras High Court judge said: “If borrowers could find newer and newer methods to avoid repayment of the loans, the banks are also entitled to invent novel methods to recover their dues.” This indicates that the publication of the photo of the borrower is also a recovery device, whereas, it was not pointed out before the court that the photo is published only after the recovery action has been taken. 
Repossession action having been taken, the question is—why would a bank at all want to do a further damage to the borrower by publishing his photograph too? Surely enough, it is not the photo of an India’s most-wanted terrorist to caution the public. If the idea is to caution other lenders, that is taken care of by credit information bureaus like CIBIL or Experian as the financial system is anyway entitled to their database. In any case, other lenders don’t lend by looking at the photo of the borrower. One would understand if default of a loan was a criminal offence, but first, a loan default is a civil wrong and not a criminal wrong, second, no one could hold a person liable of having done a crime other than a criminal court, let alone a commercial bank, and third, even in criminal wrongs, for the most heinous crimes, courts do not go all out to publish photographs. 
Irrespective of legality involved in such publication, what is happening currently is outright wrong. Our brethren who have fallen victims of bad times and are anyway deprived of the roof over their head are being further driven into ignominy by putting their photographs in the newspapers. This is so very cruel, so very inhuman, at least in case of residential mortgage loans. The Reserve Bank of India and the National Housing Bank should put an end to this practice immediately.





4 years ago


The home loan and education loans are coming under welfare category. When a citizen of mid class or service class or poor class GET such LOAN to have a shelter or develop their education. But the industries and big business group get loan to develop their financial status and to earn. Hence the rule of publishing photo and following stringent recovery rules under the guise of NPA rule is not justified because there should be some difference between government policy and Local Money Lender. Presently the banks are after small educational loan or house loan debtor but leave big fishes who borrow several crores. The Honurable Supreme Court also commented and referred a words of “ No action Against BIG FISH but against SMALL FISH” in some Cases.

098430 65011


4 years ago

I agree with the author.When recovery proceedings are initiated by taking possession of securities and filing of a suit in DRTand the matter is sub judice, publication of photos is not called for and can be termed as abuse of powers, as hapless individual cannot fight with institutions. Such name and shame policy simultaneously with the judicial process erodes -- and not supplements-- the powers of courts. While sharing information on defaults is consented to by the borrowers, such publication of photos may not be covered under the agreements executed.
How about publishing simultaneously the photos of bank officials who sanctioned and monitored these loans for the general information of public.


4 years ago

A very few case need such act of Publication of photographs.
We should definitely think of financial discipline. If it does not exist, the economy may collapse.
We are developing economy, we can not afford to lose like US where thousands of banks shut down and left with hard earned money of public.

Vinod Kothari

5 years ago

Thanks for the comments. However, some commentators are missing the point that the bank is not publishing the notice of default; that notice is neither required nor done. The bank is publishing the notice of having seized the property. So, after having taken recovery action and taken symbolic possession of the property, what is the bank intending by publishing the photo? Question quite often is not what is wrong in it; the question is what is right in it.
I made a special case of home loans; that is where the pain of dispossession is the maximum, but in principle, my opinion is applicable on all loans.

Sucheta Dalal

5 years ago

I am surprised at the comments. Indeed banks are quick to name and shame and print pictures of borrowers.

As a member of the services committee of one bank, I can tell you that defaults are minimal in housing finance unless there are extraordinary situations. That is because nobody wants to lose the roof over their head.

On the other hand, there is dubious lending that leads to defaults. Here, the banker is just as culpable. Some scandalous cases, where a nationalised banks lent to 100 people on the same set of photocopied documents are carefully kept away from the public eye.

And, the main question is ... will banks dare to shame large borrowers in the same way? Which bank chairman is taking responsibility for Vijay Mallya's Kingfisher, or Deccan Chronicle or hundreds of others?

After the SARFESI Act, banks have used their power only against the mango people. Lets not lose sight of that. In fact, lets campaign for bank chairmen being held personally responsible for some of these loans -- it will ensure two things.
1. They wont lobby and pay to get the chairman's job.
2. They will not listen to politicians and dubious CAs, because their lives will be more important.



In Reply to Sucheta Dalal 5 years ago

I agree with you. To a great extent, quite a few CAs ( US Embassy calls them - Convenient Accountants) are responsible for big NPAs / frauds / and Corruption advice. Look how DLF has spread the payments to Vadhra. Do you think any one other than a CA can think of such dubious methods. I wish CVC comes after the Top Bankers for King Fisher NPA.


5 years ago

But, the same Banks do not publish pictures of big industrialists / directors who have defaulted despite their personal guarantees.

R Balakrishnan

5 years ago

Irrespective of the reasons or the circumstances, the fact is that there is default. Defaulter should not object to his becoming (in)famous. As it is the lenders are portrayed as monsters, for the single fault of lending to the wretched borrower. If he cant pay, he should be able to suffer all insults. The way to avoid his loss of face is to pay up on time or simply give up the asset.


5 years ago

The banks are right and you cannot take a high moral ground.
It is not true that (as your article says), with just three months EMIs in arrears, the house would be lost or that the photo will appear.
The borrower can always make representations and take time.
The number of cases where borrower lost his job etc is very minimal.
You may do an analysis of the borrowers whose photos have been published and their source of income and maybe the % of salaried class who defaulted would be hardly any.
If the borrower is keen that his photo doesn't get published, why wait for the bank to sell off the house.He can as a last resort sell the house himself and buy another house when the position improves.
Why blame the lender who in good faith lent the money.Banks as you yourself say (maybe in other articles) are the repositories of public money.Let them take what are fair and legit recovery means.
However they should employ the same recovery methods for all borrowers including Dr Vijay Mallya.

Sensex, Nifty still directionless: Monday Closing Report

A small recovery is possible tomorrow but the trend is sideways to down

The market settled in the positive amid choppy trade on support from fast moving consumer goods, oil & gas and realty stocks and a optimism from the European bourses. As we mentioned in our Friday’s closing report, today the Nifty moved in a narrow range of 5,651 and 5,694. The market is still to find a direction and we continue to maintain that the market may probably take 2-3 trading days to form a clear picture. The National Stock Exchange (NSE) saw a lower volume of 55.76 crore shares and an advance decline ratio of 870:865.


The market opened near its previous closing levels on cautiousness ahead of the announcement of the headline inflation data for September and corporate earnings reports from Reliance Industries and Axis Bank.  A subdued trend in the Asian pack also added to the local woes.


The Nifty opened two points down at 5,674 and the Sensex resumed trade at 18,691, 16 points above its previous close. The market stayed in the negative in the morning session on pressure from banking, consumer durables and capital goods sectors.


The Sensex touched its day’s low at around 10.50am while the Nifty fell to its low in noon trade. At the lows the Nifty fell to 5,651 and the Sensex dropped to 18,597.


Bargain hunting by investors at the lows helped the indices recover and emerge into the positive around 1.00pm. A green opening by the key European indices also supported the sentiment.


The buoyancy saw the benchmarks hitting their highs around 1.15pm wherein the Nifty went up to 5,694 and the Sensex climbed to 18,726. The market stayed in the green in the remainder of the trading session, however, nervousness capped the gains.


The Nifty closed 11 points up at 5,687 and the Sensex settled at 18,714, a gain of 38 points over its previous close.


Among the broader markets, the BSE Mid-cap index added 0.06% and the BSE Small-cap climbed 0.43%.


The gainers in the sectoral space were BSE Fast Moving Consumer Goods (up 0.75%); BSE Oil & Gas (up 0.53%); BSE Realty (up 0.52%); BSE Bankex (up 0.37%) and BSE Power (up 0.35%). The losers were led by BSE Consumer Durables (down 0.84%); BSE IT (down 0.76%); BSE TECk (down 0.49%); BSE Auto (down 0.30%) and BSE Capital Goods (down 0.24%).


Eighteen of the 30 stocks on the Sensex closed in the positive. The key gainers were Hindalco Industries (up 1.83%); BHEL (up 1.55%); Cipla (up 1.44%); Bharti Airtel (up 1.15%) and Tata Power (up 1.12%). The major losers were Maruti Suzuki (down 2.46%); Infosys (down 1.25%); Sterlite Industries (down 1.02%); Larsen & Toubro (down 0.88%) and Coal India (down 0.74%).


The top two A Group gainers on the BSE were—Syndicate Bank (up 4.47%) and Godrej Industries (up 3.83%).

The top two A Group losers on the BSE were—TTK Prestige (down 5.08%) and Maruti Suzuki (down 2.46%).


The top two B Group gainers on the BSE were—Somi Conveyor Beltings (up 19.72%) and Minaxi Textiles (up 18.57%).

The top two B Group losers on the BSE were—Paradip Overseas (down 19.97%) and Vinayak Polycon International (down 19.83%).


Out of the 50 stocks listed on the Nifty, 27 stocks settled in the positive. The top gainers were Siemens (up 1.91%); BHEL (up 1.77%); Hindalco Industries (up 1.74%); Cipla (up 1.62%) and Ranbaxy Laboratories (up 1.58%). The main losers were Maruti Suzuki (down 2.64%); Infosys (down 1.32%); Sesa Goa (down 1.29%); Jaiprakash Associates (down 1.19%) and Lupin (down 1%).


Markets in Asia reversed early losses but closed with minor gains on concerns about earnings and the global slowdown.


The Hang Seng added 0.06%; the Jakarta Composite rose 0.05%; the KLSE Composite rose 0.07%; the Nikkei 225 climbed 0.51% and the Straits Times closed 0.04% higher. On the other hand, the Shanghai Composite dropped 0.30%; the Seoul Composite declined 0.40% and the Taiwan Weighted fell 0.24%.


At the time of writing, the CAC 40 of France was 1.26% higher, DAX of Germany gained 0.72% and UK’s FTSE 100 rose 0.48%. Simultaneously, the US stocks futures were trading in the positive, indicating a positive opening of US stocks.


Back home, institutional investors—both foreign and domestic—were net buyers in the equities segment on Friday. While foreign institutional investors pooled funds worth Rs201.16 crore, domestic institutional investors pumped in Rs188.28 crore in stocks.


ITeS major Mahindra Satyam today signed a memorandum of understanding (MoU) with the Dehradun-based University of Petroleum & Energy Studies (UPES) to facilitate joint research and development projects and consultancies in the oil and gas industry.


Under the agreement, the engineering students of UPES will gain industrial exposure and acquire practical competencies through training from Mahindra Satyam’s experts. Satyam Computer declined 2.36% to close at Rs107.55 on the NSE.


Engineering and construction firm Unity Infraprojects on Monday said it has received orders worth Rs 315.8 crore. It has received a Rs197.8 crore order from the Bihar Agriculture University and another worth Rs 118 crore for composite work for construction of data centre complex at Bengaluru. The stock gained 0.73% to close at Rs48.05 on the NSE.


Micro Technologies (India), developer and marketer of security devices and solutions has, bagged an order from its Israel distributor to provide its Micro Trolley Management System (Micro TMS) for swifter and safer trolley movements and baggage clearances for Maior International Airports. The stock declined 1.51% to settle at Rs39.25 on the NSE.




5 years ago


As predicted, the Indian government has started its divestment drive. The govt. is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to the old r a n d i (prostitute) to satisfy his private needs because the younger fresher one is too expensive. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. SELL ALL STOCK. ( post below)

India. Reforms. Really?

Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

The Indian economy, in fact, requires Parashurama’s ax and not the surgeon’s scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

Is the market discounting the possibility that in a few weeks, all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

RIL Q2 net profit down 5.7% to Rs5,376 crore despite higher revenues

Reliance Industries said weakness in global economies and resultant margin environment resulted in its second quarter net profit declining 5.7% even as its revenues increased by 15.4% to Rs93,265 crore

Reliance Industries (RIL), India's largest private sector company, on Monday reported a 5.7% fall in its second quarter net profit.
For the quarter to end-September, RIL said its net profit fell to Rs5,376 crore from Rs5,703 crore even as its total revenues, including sales, increased 15.4% to Rs93,265 crore. 
Similarly, for the first half ending 30th September, the Mukesh Ambani-owned company said its net profit fell 13.3% to Rs9,849 crore while total revenues rose 14.4% to Rs1,88,191 crore.
“RIL’s business and financial performance for the first half of FY 2012-13 has been satisfactory despite weakness in global economies and the resultant margin environment. On a sequential quarter basis, net profit for the quarter was up 20% at $1 billion," said Mr Ambani, in a release.
During the second quarter, RIL reported a gross refining margin (GRM) at $9.5 per barrel (bbl). For the first half, the company said its GRM was at $8.5 per bbl.
RIL said cumulative production its Krishna-Godavari (KG) Basin D6 block was 1.7 million barrels of crude oil and 197 billion cubic feet (BCF) of natural gas in first half of FY13, reduction of 37% and 35.1% respectively on a year-on-year (Y-o-Y) basis. This reduction was due to reservoir complexity and natural decline. Production of gas condensate was 0.3 million barrels, a reduction of 25% over the previous period, it added.
RIL is setting up a $4 billion petroleum coke gasification project that will produce synthetic gas which will replace expensive LNG as fuel at the refinery. “We are adding significant project of petroleum coke gasification,” Tony Fountain, chief executive for refining and marketing, RIL, told reporters earlier in the day.
He said the company continues to keep most of its 1,452 petrol pumps closed in the absence of a level playing field with its main public sector competition.
While the government has freed petrol pricing, diesel continues to be sold at heavily subsidised rates. “We are not selling diesel anywhere... Only a few outlets are operating (for petrol sales),” he said. “We were 13% of the market (before outlets were shutdown as it could not complete with public sector).” 
“We are ready to reopen (petrol pumps) if the fiscal environment is right,” Fountain said, adding that the government should either free diesel pricing from its control or provide subsidy equivalent to private firms as well.
India has 25 oil refineries with a crude oil processing capacity of 215.066 million tonnes. This will rise to 264.966 million tonnes by 2015-16 as fuel demand grows. Diesel consumption grew by 7.8% in 2011-12 and by 10.2% in the first quarter of current fiscal.
On Monday, RIL closed marginally higher at Rs823.20 on the BSE, while the benchmark Sensex also closed marginally up at 18,713. 


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