RBI ombudsman comes to rescue of deceased loan-borrower’s kin

In a rare and stronglyworded directive exposing deep flaws in Indiarsquos colending system the Reserve Bank of India RBI ombudsman an independent official often governmentappointed who investigates and resolves complaints from citizens or consumers against public bodies or companies has held ICICI Bank and SBFC Finance Ltd guilty of procedural failures KYC lapses and insurance concealment in a loan issued to a deceased borrowerrsquos family The order followed a conciliation hearing on September 1 2025 in response to a complaint filed by Ahmed ParkarThe 2022 caseThe case relates to a 2022 loan against property Abdul Wahab Parkar 65 was sanctioned Rs 13 lakh under an ICICISBFC colending model In the loan application the coapplicantsrsquo names and signatures present were his son Ahmed Parkar and his daughterinlaw The loan was sanctioned in MayJune 2022 and Abdul died on December 26 2023Following his demise recovery agents repeatedly visited the familyrsquos Santacruz home mdash where only women resided mdash demanding EMIs without providing loan documents The agents threatened them with property seizure and used aggressive recovery tactics Ahmed filed an RBI CMS Complaint Management System complaint against SBFC and ICICI on November 24 2024Ombudsman steps inOn September 1 2025 a conciliation meeting was held at ORBIO RBI Bhubaneshwar The meeting was chaired by the RBI ombudsman Odisha and attended by the deputy ombudsman along with officers from ORBIO Bhubaneshwar The ombudsman found that Ahmed was never physically present when the loan was sanctioned He was in Qatar at the time of application his signatures hadnrsquot been verified and the lenders admitted to bypassing KYC norms mdash a grave regulatory breachAfter reviewing evidence and holding the conciliation hearing the ombudsman also flagged insurance manipulation A premium of R20982 was deducted for credit protection but the policy was later altered issued in another name and cancelled without informing the family Calling this an operational lapse RBI ordered that the loan be adjusted against the deducted insurance premium and Rs 50000 each be paid by ICICI Bank and SBFC Finance for mental distress within seven working days The ombudsman also closed the loan account and directed that the original documents be returned to the familylsquoInhuman behaviourrsquoSpeaking with midday Ahmedrsquos brother Ayaz Parkar described the lendersrsquo actions as ldquoshameful and inhuman towards a grieving familyrdquo He alleged that an additional R241896 in EMIs was taken from the family through ldquomafialike methodsrdquo for which a fresh complaint has been filedIn a heartfelt message Ayaz said ldquoDo not borrow unless it is truly necessary Debt is a heavy burden Do not build your business with loans rather use what you have saved Death comes suddenly without regard for age or health Protect your family by ensuring they are not weighed down with unnecessary debts And if you do take a loan share this with your family mdash never hide it If your family advises against borrowing listen to them they only wish your wellbeingrdquoThe other sideAn ICICI Bank spokesperson confirmed the development and said ldquoAs a responsible financial institution together with our colending partner and its insurance company we have supported the family significantly by fully settling the loan and closing the loan account This is in addition to having complied with the directives within the timelines indicated We have also returned the original documents to the family a few months agordquo