A bench of justices Ahsanuddin Amanullah and R Mahadevan said it was increasingly noticing a troubling pattern in the banking sector where stringent scrutiny was reserved for individuals seeking loans for personal needs, whereas large-value loans appeared to be sanctioned with inadequate assessment of repayment capacity.

“We indicate that it is coming to the notice of the Court that the banks in general, including respondent no.1-SBI, are casual in granting loans of huge amounts to bigger entities but at the same time very demanding apropos small loans where ordinary people come for personal requirements, yet subjecting them to more stringent conditions and a tedious process, which may amount to, in certain cases, borderline harassment,” said the bench in its recent order.

While dismissing a petition filed by a Haryana-based company that had defaulted on an ₹8.09 crore loan availed from SBI, the court nevertheless expressed strong displeasure at the functioning of banks and urged India’s largest lender to revisit its policies.

The bench specifically called upon SBI to consider making the loan process “easier and fairer” for ordinary citizens and those belonging to weaker economic sections.

“Be it noted that we are in no way suggesting easing of norms and requirements for loan facilities… but the procedure so adopted can certainly be made easier and fairer for loan-seekers/applicants and thereafter at the stage of recovery also,” said the court.

The bench further suggested that lending and recovery policies should be redesigned to benefit those at the lowest end of the economic spectrum.

“With regard to concessions/incentives, the policy needs to be suitably framed/graded so as to give the maximum benefit to the persons who are at lowest rung of the social/financial strata,” it added.

In a notable move, the bench requested additional solicitor general Archana Pathak Dave, appearing for SBI, to convey the court’s concerns to the bank “at the appropriate level”.

The observations came during the hearing of a dispute involving a company that had obtained a loan of ₹8.09 crore from SBI in 2019 but defaulted almost immediately. According to the court, the borrower failed to repay even a single instalment after availing the loan facility and the account was classified as a non-performing asset (NPA) within months.

The bench found the borrower’s conduct indefensible, describing its offer to repay only the principal amount six years later as “too little too late”. IT then declined to interfere with proceedings initiated by SBI under the SARFAESI Act for taking possession of the borrower’s secured assets, even as it granted the company a final two-week protection to pursue remedies before the debt recovery tribunal.

The court simultaneously questioned how such a large loan came to be sanctioned in the first place.

“We find that there has been negligence on the part of the SBI and its officials in granting/sanctioning a huge loan of ₹8,09,00,000 to the petitioner-company,” said the court, adding that the borrower’s immediate default was a “clear indicator” that a proper assessment of repayment capacity may not have been undertaken.

The observations assume significance against the backdrop of some of India’s biggest banking defaults over the past decade.

Public sector banks have grappled with a series of high-profile corporate loan failures involving companies such as the now-defunct Kingfisher Airlines, which left behind bank dues exceeding ₹9,000 crore, and the ₹13,000-crore fraud involving Punjab National Bank. The collapse of Infrastructure Leasing & Financial Services with debts of over ₹90,000 crore and defaults by groups such as DHFL and Essar Steel also exposed serious weaknesses in credit appraisal and risk assessment within the financial system.

The Supreme Court, however, stopped short of issuing any directions in the present case, observing that a more appropriate matter with specific facts may warrant judicial intervention into broader banking practices.

“Whilst recording our displeasure at such workings, we leave it for a more fit case where specific orders may be called for against such practices of the banks in general, including respondent no.1-SBI,” said the bench.

SBI’s defence was focussed on the borrower’s conduct rather than the bank’s lending practices.

Defending the bank’s actions, Dave argued that the borrower-company’s conduct spoke for itself as it had failed to pay even a single instalment after availing the ₹8.09-crore loan on commercial terms. She further pointed out that the company had already challenged the recovery proceedings before the DRT, where its securitisation application remains pending, and urged the court not to interfere in the matter.