The Karnataka High Court has issued a directive to Canara Bank, limiting the deduction from a retired employee’s pension for loan recovery purposes to no more than 50 percent. This ruling came after the court considered the essential nature of pension as a source of financial security for retirees.
Justice S.G. Pandit, presiding over the case, emphasized that while the recovery of dues is a legal right of banks, the methods employed must not undermine the basic livelihood of pensioners. The decision highlights the balance between creditors’ rights and the protection of retirees, ensuring that pensioners maintain sufficient income to support themselves.
The case involved Murugan O.K., a 70-year-old former employee of Canara Bank, who retired on November 30, 2014. Murugan, now living in Thrissur, Kerala, approached the court after Canara Bank began deducting the entirety of his pension from July 2024 to settle his loan dues. He argued that such actions threatened his financial stability and well-being.
Murugan had been meeting his loan repayment obligations by dedicating a portion of his pension to monthly EMI payments. However, the bank’s decision to escalate the recovery from his pension fund prompted him to seek legal redress. He also petitioned the court to prevent the bank from levying penal interest on an educational loan that he co-signed with his daughter.
In defense, Canara Bank claimed that Murugan still owed Rs 8.5 lakh and asserted its rights to recover the full amount due. Nevertheless, the court ruled that the bank’s recovery efforts must be limited to 50% of Murugan’s pension and suggested that the bank consider other legal methods for recovery, such as seizing collateral if available.
Justice Pandit further noted that for employees still in service, it is uncommon for loan recovery efforts to exceed 50% of their net salary. He stated that a similar principle should apply to pensioners, reinforcing the need to protect their financial health and dignity.
