A Significant Legal Ruling for Rajasthan’s Banking and Financial Sector
The Rajasthan High Court recently delivered a landmark judgment that is expected to bring significant relief to banks and financial institutions across the state.
The matter concerned the charges levied for obtaining police assistance to take possession of properties during the recovery of outstanding loans. In many instances, these charges were exorbitant; for example, in one case, a sum of ₹1.29 lakh was demanded for police assistance regarding an outstanding loan of approximately ₹5.51 lakh.
Several banks, including AU Small Finance Bank, had filed petitions with the Rajasthan High Court regarding this issue.
In its ruling, the High Court stated that administrative orders or government circulars cannot supersede statutory rules. Unless the relevant rules are amended through the prescribed legal process, the police department cannot charge fees exceeding the rates stipulated in Rule 10 of the Rajasthan Police Rules, 2008.
The Court has set aside all demands for additional charges that exceeded the prescribed legal rates and directed the concerned officials to issue fresh bills in accordance with the rules.
Why is this ruling significant?
The impact of this judgment extends beyond a single case. It is expected to make the loan recovery process more transparent, systematic, and cost-effective for banks and financial institutions throughout Rajasthan. Consequently, the expenses incurred during the process of taking possession of mortgaged properties will be significantly reduced.
The Role of AU Small Finance Bank
AU Small Finance Bank was the lead petitioner in this matter. This court ruling is likely to prove beneficial not only for the bank but for the entire banking and financial sector operating in Rajasthan.
This judgment also exemplifies how legal departments do more than just protect institutional interests; they can identify systemic issues and find solutions that benefit the entire industry and the broader financial ecosystem.
AU Small Finance Bank takes pride in the entire team and all the associates who contributed to this significant achievement.