Bengaluru: Coming to the rescue of a retired bank employee, Karnataka high court recently directed Canara Bank not to debit more than 50% of his pension to settle his equated monthly instalments (EMIs) against loan dues.
Justice S G Pandit clarified that legal regulations allow for the recovery of the entire pension amount only in cases where an employee is convicted of fraud and forgery or found guilty of misconduct.
The judge, however, allowed Canara Bank to resort to any other mode available within law to recover the loan, along with interest. He noted that the bank could enforce the security obtained against the loan, for instance.
“Pension is paid to an employee to sustain himself after retirement. Normally, [loan] recovery should not exceed 50% of the take-home salary, if an employee is in service. The same principle should apply in this case also,” Justice Pandit observed in his order, while partly allowing the petition filed by one Murugan O K.
The judge further said if the entire pension is allowed to be used to recover loan dues, it would be a violation of Article 21 of the Constitution, which guarantees right to protection of life and personal liberty.
Now residing in Thrissur, Kerala, 70-year-old Murugan had retired from Canara Bank on Nov 30, 2014. He approached the high court last year, seeking a directive to stop the recovery of his full pension towards his loan dues and to also stop penal interest on an educational loan for which he was a co-obligant with his daughter.
According to him, until June 2024, he was paying the EMIs from a part of his pension amount. However, from July 2024, the bank suddenly started debiting his entire monthly pension against EMIs.
Canara Bank claimed that he owed Rs 8.5 lakh and the bank was within its rights to recover the same.
If recovery of the entire pension is permitted towards realisation of the loan balance, it would defeat the very object of payment of pension, the judge explained.