A Haryana district consumer disputes redressal commission has penalized Axis Bank for failing to update a borrower’s credit record and issue a loan clearance certificate despite the full repayment of a vehicle loan.
The consumer body directed the private lender to rectify the complainant’s Credit Information Bureau (India) Limited (CIBIL) status, issue a No Objection Certificate (NOC), return all original documents submitted at the time of the loan sanction, and pay Rs 20,000 to cover compensation and litigation expenses.
In the ruling delivered on July 2, a panel comprising President Jaswant Singh and members Neeru Agarwal and Sarvjeet Kaur determined that the bank’s failure to clear the borrower’s record after the loan was settled constituted both a deficiency in service and an unfair trade practice. The commission noted that because the entire loan amount had been cleared, the bank was legally obligated to remove the customer’s name from default status.
Dispute Over Pandemic Moratorium
The case stems from a Rs 12.90 lakh vehicle loan that the complainant had secured from Axis Bank. The agreement originally required the borrower to pay 36 monthly instalments of Rs 41,625, which were set up to be auto-debited from an HDFC Bank account.
However, during the COVID-19 pandemic in June 2020, the borrower opted for a five-month payment moratorium. This temporary pause affected the seventh through eleventh instalments, subsequently extending the total repayment schedule from 36 to 42 months.
Axis Bank defended its actions by accusing the customer of intentionally suppressing these facts. The lender argued that the borrower failed to disclose the five-month pause and asserted that the bank had paid additional funds into the loan account during the moratorium period to manage the outstanding liability, which the customer was fully aware of.
Unresolved Requests Led To Credit Damage
The dispute intensified in March 2023 when the monthly payment, which had been adjusted upward to Rs 58,497, was not automatically debited on scheduled dates. The customer pointed out that his HDFC account held Rs 1 lakh at the time, which was more than sufficient to cover the transaction.
In mid-March 2023, the borrower contacted Axis Bank to request an NOC before the closing of the financial year on March 31. When the bank failed to respond or deduct the final payment, the borrower sent further clarifications in late August 2023 regarding the moratorium.
To resolve the matter, the customer eventually requested a foreclosure letter and paid Rs 25,539 to close the account. The final payment was made via a cheque on September 2, 2023, which the bank cleared on September 4. Despite the account closure, the bank ignored multiple follow-up emails sent in September and October 2023 requesting the clearance certificate, which the borrower warned was actively damaging his credit score.
Commission Rejects Bank Defenses
The consumer commission rejected Axis Bank’s arguments, noting that while the pandemic moratorium did extend the loan term to 42 months, the customer had maintained sufficient funds in his account when the final payment was due.
Because the bank did not dispute that the entire loan had eventually been paid off, the commission ruled that the bank had no justification for withholding the clearance documents or leaving the borrower’s credit score damaged. The forum concluded that the lender’s inaction directly harmed the borrower’s creditworthiness and business prospects.
