Legal Question in Banking Law in India

I was having a Cash Credit account at one of the leading banks. Bank was deducting a certain amount of money each year as Insurance Charges of the stock from our account, he did it for consecutive three years. We had a robbery at our shop in the fourth year, when we claimed bank for insurance then it told us that he had not made insurance this year and neither had deducted any money for that for the fourth year and it is also saying that he is not bound to make the insurance under Banking Law 7A.

Bank had never informed us that he is/ had made the insurance neither it had informed us that it has not made the insurance for the fourth year.

Please let us know is bank bound to do the insurance or not?


Asked on 6/14/12, 9:57 am

2 Answers from Attorneys

J. Radhakrishnan independent Practice

In the loan documents you have executed there may be a clause enabling the bank to make insurance at your cost and debit the charges to your account. It may also contain that the bank 'may' insure but not 'bound to insure'. If there is such a clause, the bank may take advantage of that clause for failure to insure. However, since the bank has been insuring in the past years and failed to continue, you can hold the bank liable for failure in its duty to insure. This however is subject to the drawing power being available in your account i.e. your account at the material time did not exceed the limit granted to you.

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Answered on 6/20/12, 5:31 am
Pravin Vaidya Independent

Please approach Banking Ombudsman office in your area & lodge a complaint with them

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Answered on 6/24/12, 9:38 pm


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