[aniketi]

It's a normal practice, don't worry. Good Banks never misuse your blank cheques. You make sure you issue cheque on Bank's name only and make sure it's crossed. This way nobody can make any misuse of it. I have given this twice while purchasing my both cars, no worries.

Last time I gave only 1 or 2 blank cheques to SBI, don't remember correctly. Not 6 for sure but.

[krishsreedharan]

I have 3 auto loans with HDFC - all of them on ECS. In neither of these loans was I asked for any PDCs or cheques of any sort.

But on the topic, when there was a paradigm shift in the 90's of collecting 36 month PDCs for a Car Loan, one thing my father was very firm about is that if you can pay the entire amount and buy the vehicle, then do it. Do not fall for the PDC requirement since it was bad business practice.

I do remember a few times when Finance Companies (NBFCs) with whom he dealt with would waive the requirement for PDCs in his case. Needless to say, he never missed an instalment and almost always, foreclosed the loan.

I have tried, to the best of my ability, to follow this practice and the migration of this requirement from PDC to auto-debit of the account is a welcome change.

Never-the-less, nothing like buying the vehicle cash down - where possible.

My two cents.

Cheers!
Krish

[Ulysses]

The banks asks for blank cheques for all kinds of unsecured loan (where the value of the collateral to be mortgaged is presumably lower than the liability, for example depreciated value of a vehicle) such as auto, consumer finance (higher amount only) and auto loan. However, the correct legal procedure is to give "cancelled and signed blank cheque" not bearer blank cheque (absolutely no no, because anyone can steal that and empty the bank account!) or crossed blank cheque. Also the cheque should be in name of bank (never in name of dealer) with the loan account number clearly mentioned. The bank should give an acknowledgment on the photocopy of the cheques along with date and official seal.
The logic behind this is to create a criminal case against the borrower in case of default by means of dishonored cheque. As long as the cheques as crossed, in name of bank and duely cancelled, there is no way anyone can use those cheques other than by bank with a valid case of loan default.

[FlashMustang]

I too went through this experience. I had issued blank cheques in the name of the bank when I had taken the loan for my car in 2012 from Kotak Mahindra bank. The loan was for a period of three years. I had paid every installment without delays and the loan was closed and NOC issued promptly after the full repayment, and I got my new RC without the hypothecation. I did not receive the blank cheques back, but, so far, I haven't had any issues with the cheques I had issued at the time of availing the loan. I'm assuming all is well.

[racer_7]

Originally Posted by ABHI_1512

Many public sector banks have this thing of withholding the spare key as some sort of collateral but I have hardly come across NBFC’s like Bajaj Finance or Reliance or for that matter private banks doing the same. Public sector banks are still stuck in some warped notion regarding loans and that is why, lenders like HDFC are in the top spot in disbursing loans despite of their strict compliance structure.

Am sure they would not have asked for the spare keys of the yachts and Ferrari's belonging to the Mallyas and Modis of the world. Biggest chunk of the NPA's are owned by these bigshot crooks and its people like us who have to bear the consequences. I still remember I had given the spare key of my XUV500 to a public sector bank and after I closed the loan the keys were not traceable! The staff blamed it on the ex manager who had transferred to another branch location. It took me almost a month of scare mongering emails and phone calls to finally trace my key

[Carpainter]

Originally Posted by avingodb

Generally that does not happen. Extra cheques are needed only if the loan disbursing bank is different from the one where you have the debit account.

Not necessarily true. See if you don't have any savings or current/deposit account with the disbursing bank then it's almost compulsory for them to obtain PDC. But even in case where deposit and loan accounts are with the same bank, they can ask for PDC because by giving a cheque you are giving them your mandate to debit your account. It's not that they can't debit your account without these cheques in case of default but obtaining signed cheque is legally prudent practice. But yes PDCs should be undated but not blank. It's a risk on the customer's part to issue undated uncrossed blank cheque to anyone even if it's his own banker.

[D'Ro@dSt@r]

Ahh, I did that day before yesterday and handed over 6 blank cheques to Bank of baroda, when i insisted that I would put the EMI amount and not comfortable giving blank cheques, response I could get was, "Sir you are addressing a nationalised bank on the cheque and you dont have to worry abt any misuse of these cheque. We only keep them as security."
I had to give in with that argument getting nowhere.
My another point of worry is that the Bank has issued me a letter where in its mentioned that I will have to submit the spare key along with duplicates of RC, Invoice & Insurance. Is that also a norm or I am being treated differently.?
Sorry if It is off-topic

[asingh1977]

Originally Posted by racer_7

I still remember I had given the spare key of my XUV500 to a public sector bank and after I closed the loan the keys were not traceable! The staff blamed it on the ex manager who had transferred to another branch location. It took me almost a month of scare mongering emails and phone calls to finally trace my key

Can you top this.
When I foreclosed my home loan [TATA Capital], I paid the last cheque, and after 14-15 days they called me for the original documents. All was there, except the court registry! I almost lost it. They said: you never gave it, and even suggested "we can help you make an original duplicate". Luckily, I had another document from them [called LOD -- list of documents], with their purple stamp endorsed on it, which clearly stated they have my registry. They dug it up after 20 days, of me having nightmares.

Originally Posted by D'Ro@dSt@r

My another point of worry is that the Bank has issued me a letter where in its mentioned that I will have to submit the spare key along with duplicates of RC, Invoice & Insurance. Is that also a norm or I am being treated differently.?
Sorry if It is off-topic

Since when did these banks start asking for the spare key. Will they drive away the car? It totally defeats the purpose of a spare key, and why the manufacture gives it. Such a funny collateral. Take your business else where.

[whitecloud]

In 2001, I used to work with a housing finance company owned by a public sector bank .In those times, RBI rule mandated that housing loan customers could not be obliged to give more than 12 advance EMI post dated cheques .

The whole process was that whenever, the Loan was sanctioned , 12 advance EMI /interest repayment cheques were obtained and two blank cheques were also obtained .Atleast three months before the exhaustion of the 12 cheques, the customer was informed to deposit new cheques .

And yes , one of the blank cheque was used by the housing finance company only after a continous default of 3 months in EMI /overdue interest .After 3 months , lots of negotiations were tried by the company and only in case of customers unwilling to pay up not even a single EMI or non response from repeat defaulters , the overdue amount alongwith the penalty ,penal interest and other admistrative charges were added up and the cheque was sent in clearing with a likely chance of bouncing .The second cheque was also used in the same way and the only difference being that the principal outstanding amount was also added up .Most of the customers used to pay up or regularize their EMIs upon receiving the notice under negotiable instruments act .Criminal case was also filed after following due process of law against wilfully defaulting customers.

I have availed car and home loans multiple times and everytime , the bank was handed over a blank cheque.Upon full repayment of loan ,the blank cheque was returned back by the bank after cancellation to me either in person or by post.

It is a unethical process but it seems that government and RBI seem to have given a tacit approval to this to ensure minimum delinquency by the borrowers.

[TheCatalyst]

This happened with me when I purchased my car last year. I was told to not put the amount on the cheque. I was initially taken aback and I was totally not comforatable doing this. I might as well give them my bank PIN.

However the car salesman sensed this and as we were introduced through a common friend, he suggested me to put the words 'Not More Than Rs.xxxx/-' on the front face of the cheque.

He said, they do this as the insurance provider will calculate the exact amount later and put it themselves. In my case, since it would be between 85-87K ballpark, I had put 'Not more than 88K' on the cheque.

[Fuldagap]

1. There is a complaint register with bank branches and insurance company branches. Although it sounds silly to ask for it, it's an effective tool to get things done from the staff. Just tell them politely to present the said register and write down your complaint in it. The staff will do everything in their hands to not present the register to the customer as it is going to be under scrutiny in the next audit. Complaint registers are mostly empty in all branches as customers are not aware of it and officials do not present it even when asked for it.

2. Going to the banking ombudsman is another right thing to do.

3. In days of email, just shoot an email with your complaint or issue to the CEO or MD keeping the Branch Manager and other officials in CC. See how they quickly get to mend their ways.

4. Whatever the officials are asking you to do, just ask them back to give that in writing on a letter pad or email. That will back them off.

Try never to lose patience and politeness. Kill them with kindness, as they do to you

These are some so called tools to tackle staff at private or public sector companies in banking or insurance. Never ever hesitate even for a second to make the smallest of your complaints at the highest level.

[whitewing]

With the changes check clearing process, it would be hard for the lenders to go this route of blank & undated cheques.

https://economictimes.indiatimes.com...w/78322892.cms

In order to check banking fraud, the Reserve Bank of India has decided to introduce from January 1, 2021, the 'positive pay system' for cheque, under which re-confirmation of key details may be needed for payments beyond Rs 50,000.

Availing of this facility would be at the discretion of the account holder. However, banks may consider making it mandatory in case of cheques for amounts of Rs 5 lakh and above

[vrprabhu]

Originally Posted by whitecloud

.... used to work with a housing finance company owned by a public sector bank. In those times, RBI rule mandated that housing loan customers could not be obliged to give more than 12 advance EMI post dated cheques.

The whole process was that whenever the Loan was sanctioned, 12 advance EMI/interest repayment cheques were obtained and two blank cheques were also obtained. Atleast three months before the exhaustion of the 12 cheques, the customer was informed to deposit new cheques.

.......

It is a unethical process but it seems that government and RBI seem to have given a tacit approval to this to ensure minimum delinquency by the borrowers.

Correct.

Next part of my reply is going to generate a lot of flak / heat

Umbrage welcome!

Let us take a look from the bank's side.

They take a 'credit risk' and give you a loan : say, 1,00,000 or 10,00,000 or 1,00,00,000 or whatever, based on your need and on their assessment that you will be regular in re-payment of the loan.

The security for the loan is your car or house or the asset financed by the loan.

We all know what happens to the value of the car the moment it is driven out of the showroom : depreciation kicks in, even if it is a brand new model. While the value of a house may appreciate, finding the right buyer for the right price and completing the sale transaction, so as to recover the dues (when there is a default) is easier said than done. Ipso facto, there is no guarantee that the said 'security' will realise the outstanding dues if there is a default.

So, there is a likelihood of 'erosion' in the value of the security; also, shouldn't they (banks) ensure that the borrower is held liable for recovery of the dues - after all the money lent is not owned by the Bank but by the depositors? Thus, the concept of taking blank cheques as a fall-back was introduced - and continues, I guess.

Please also view it from this angle - that whilst all of us are likely to be very conscious not to fall under the 'defaulter' tag, there are many unscrupulous elements tarnishing the image of good borrowers (~85%, if we take around ~15% as borrowers in NPA/default).

There is also the concept of 'accountability' of the person who has approved your loan - which is another matter altogether.

While handing over signed blank cheques will definitely cause queasiness in our minds, it is not likely to be misused as long as you are dealing with a PSB or a reputed private sector bank. And, if indeed, there is a misuse of the blank cheque, in my view, the Bank stands to lose more than the trouble you will face.

[Sanjivvohra]

I have availed housing loans and a vehicle loan, never was I asked to provide blank cheques, only 6 EMI cheques, undated.
On the NI part, whether the amount is Rs100 or Rs 10 crore, the treatment of a bounced cheque would be same i.e. criminal case and penalty of twice the cheque amount.
The scary part would be the jail time of 2 years, which will force the person to pay up.
In case of fraud by the bank employee, what would be the recourse? Suppose my blank cheque was stolen by a bank employee and used to withdraw an obscene amount from my account? Stranger things have happened. Look at the Vijay Malaya and Nirav Modi cases.
I guess its just the loan disbursement officer doing a little CYA action.

[whitewing]

Originally Posted by vrprabhu

Correct.

Next part of my reply is going to generate a lot of flak / heat

Umbrage welcome!

Let us take a look from the bank's side.

They take a 'credit risk' and give you a loan : say, 1,00,000 or 10,00,000 or 1,00,00,000 or whatever, based on your need and on their assessment that you will be regular in re-payment of the loan.

The security for the loan is your car or house or the asset financed by the loan....

There is a reason why banks charge "processing fee" and perform a due diligence before sanctioning a loan.
They are taking on a "risk" and the risk weightage should be reflected in the interest they charge.If they anyway want blank cheques - essentially to cover their risks, then they better reduce the interest charged, since they are anyway not adding value and are just being a middle man.
I see this blank cheque thing as a measure to coerce the easy targets - the individual middle & lower middle class customers.