I am a salaried employee in the highest tax bracket with very good credit history. I booked a property and got a discounted rate on condition that the full disbursement would be made within December. I applied for loan in November at a government bank. They promised quick action but were painfully slow in processing. Finally I got the loan sanction letter in first week of January. Just after I signed all documents and sent them, they announced that there is a hike in r/i and a new sanction letter will be issued. I agreed to that too. But now they are asking for a undated blank check as security, apart from seventeen EMI checks. This inspite of the fact that the property is under mortgage with the bank. My question:
1) Can a bank ask for a undated, blank check? Is it a common practice? The mention of the blank check is nowhere in the loan documents that I have signed. The demand has been made verbally, but they won't disburse the amount till they get this check.
2) What options do I have at this stage, because it is already late by more than a month and going to another bank will again take a lot of time.
I think you have raised a very pertinent issue. In this regard, please go through the sanction letter issued to you, which usually contains terms and conditions of sanction. Is it mentioned there that you have to give undated blank cheque. If so and if you have agreed to it then I guess you have no alternative. Other wise if they are orally asking for it, in my view you have following options of recourse:
a) Write a strong letter to bank addressing top management and demanding immediate disbursement and threatening legal action if no action is taken immediately.
b) If nothing happens Immediately file a complaint with Banking Ombudsman for withholding disbursement despite complying with all the terms of sanction and causing financial loss to you; c)Approach some consumer rights organization for necessary guidance d) Go to some other bank
To the best of my knowledge, banks cannot demand undated, blank cheques under limitation act. So it is likely that the bank cannot demand the same in writing. Instruments like undated blank cheques are called Inchoate Instruments in legal parlance and a person who puts an inchoate instrument in circulation must be taken to have authorized what ever is subsequently inserted in it in order to make it a complete instrument. So, if you sign a blank cheque you are giving unlimited powers to your banker. You would also be facing the risk of some employee of the bank misusing the same for personal gain;
Earlier only certain private banks used to resort to such things. Now I guess even nationalized banks have begun this practice. In my view asking for undated blank cheque is quite unnecessary as you will have already singed a Demand Promissory Note which is quite sufficient for their purpose. I think people are blindly signing anything just to get a loan, it is high time some one starts questioning such practices.
RE:RE:Home loan nightmare
by uran chandi on Feb 03, 2007 12:30 PM Permalink
Hello Sowmya,
Thanks for taking the time to reply in such details. It was very helpful. Thanks, truly appreciate.
The bank has now agreed to 5 years of postdated EMI checks in place of the blank checks. There are still a few small hurdles. Hope we will be able to pull it off.
