'Banks disburse huge loans to big entities, adopt tedious process for ordinary citizens': Supreme Court

New Delhi: The Supreme Court has criticised banks, including the State Bank of India (SBI), for being lenient while disbursing huge loans to big entities but adopting overly stringent and often tedious procedures for small personal loans sought by ordinary citizens, which in some cases borders harassment.

A bench of Justices Ahsanuddin Amanullah and R Mahadevan made the observation on May 19, 2026 while hearing a plea by M/s Bhaskar International Private Limited against an order of the Punjab and Haryana High Court.

The court, however, clarified that it was not suggesting any dilution of lending norms, which are best left to the Reserve Bank of India and the banks themselves.

It emphasised that procedures for granting and recovering loans should be made simpler and fairer.

The bench further noted that policies on concessions and incentives should be framed or graded to extend maximum benefits to people at the lowest rung of the social and financial ladder.

In the case, the company had availed a loan of Rs 8.09 crore from SBI in 2019 but defaulted on instalments within months, leading to the account being declared a non-performing asset (NPA) on July 29, 2019.

SBI initiated recovery proceedings under the SARFAESI Act and obtained an order from the District Magistrate, Yamuna Nagar, in May 2024 to take possession of the secured properties.

The Punjab and Haryana High Court later directed expeditious possession.

In its plea, the company’s counsel argued that declaring the account as NPA within five-six months was arbitrary and contrary to SBI’s own policy.

The petitioners claimed they had offered to repay the entire principal amount, which SBI had not accepted, and sought an opportunity to revive the unit with some assistance.

SBI, on the other hand, contended that the borrowers had failed to repay even a single instalment despite availing the loan on commercial terms.

Upon hearing both sides, the bench pulled up the petitioner company on multiple counts.

It noted that defaulting immediately after availing the Rs 8.09 crore loan and offering to repay only the principal after nearly six years was “too little too late.”

The bench also pointed out that the company had approached the Debts Recovery Tribunal (DRT) and sought interim relief there but had not pursued it vigorously, suggesting it was attempting to gain advantage through parallel proceedings.

At the same time, the court expressed displeasure over SBI’s conduct.

It observed that the bank’s decision to sanction such a large loan, which turned into an NPA almost immediately, indicated inadequate assessment of the borrower’s repayment capacity.

“Tentatively, this is a clear indicator that a proper assessment was not made of the capacity of the borrower(s) to repay the loan by the concerned officials of SBI,” the bench remarked.

The court recorded its displeasure at such practices and said it may pass specific orders in an appropriate case.

However, noting the conduct of the petitioners, the Supreme Court declined to interfere with the High Court’s order.

It, however, granted two weeks’ status quo till June 2, 2026, and allowed the company to press for interim relief before the DRT if not already done. The court made it clear that the order would not influence the merits of the case before the DRT or any other forum.